33G.2.4 
M<SSl 
L22LL 


STATE  OF  MISSOURI 


INCOME  TAX  LAW 


LAW  AND  REGULATIONS 

RELATIVE  TO  THE  TAX  ON  INCOME 
OF  INDIVIDUALS,  CORPORATIONS, 
JOINT  STOCK  COMPANIES,  ASSOCIA- 
TIONS AND  INSURANCE  COMPANIES 

NOVEMBER  2,  1921 

IMPOSED  BY  REVISED  STATUTES  1919  AS 
AMENDED  AUGUST  3,  1921 


COMPILED  BY 

GEO.  E.  HACKMANN 

STATE  AUDITOR 


STATE  OF  MISSOURI 


INCOME  TAX  LAW 


aw  an 


RELATIVE  TO  THE  TAX  ON  INCOME  OF  INDIVIDUALS, 
CORPORATIONS,  JOINT  STOCK  COMPANIES, 
ASSOCIATIONS  AND  INSURANCE 
COMPANIES 

November  2,  1921 

IMPOSED  BY  REVISED  STATUTES  1919,  AS 
AMENDED  AUGUST  3,  1921 


M DCCCXX 


Compiled  by 

Geo.  E.  Hackmann 

STATE  AUDITOR 


Digitized  by  the  Internet  Archive 
in  2017  with  funding  from 

University  of.  Illinois  Urbana-Champaign  Alternates 


https://archive.org/details/stateofmissouriiOOmiss 


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INCOME  TAX  LAW  REVISED  STATUTES  1919 

AS  AMENDED  AUGUST  3,  1921 


TAXATION  AND  REVENUE:  Incomes. 

AN  ACT  providing  for  the  assessment,  levying,  collecting  and  paying  of  income  tax. 


SECTION 

13106.  Rates — levied — when.. 

13107.  Incomes — includes  what — classes. 

13108.  Incomes  defined  for  purposes  of  this 
act. 

13109.  Exemptions. 

13110.  Deductions  allowed. 

13111.  Exemptions — deductions,  etc.,  of  mar- 
ried persons,  etc. 

13112.  Corporations,  joint  stock  companies, 
insurance  companies,  etc. 

13113.  Incomes  exempt,  etc. 

13114.  Income  of  corporations,  joint-stock 
companies,  associations  and  insur- 
ance companies  ascertained — how. 

13115.  State  divided  into  districts — how. 

13116.  Incomes  assessed — how. 

13117.  Assessors  to  keep  separate  book,  etc. 

13118.  Assessor  to  require  report — when. 

13119.  Assessment  to  be  complete  March 
first,  etc. 

13120.  Returns — to  whom  made — how  made 
— when. 


SECTION 

13121.  Assessor  to  give  bond. 

13122.  Failure  of  assessor — penalty. 

13123.  State  auditor  may  question  assess- 
ment— when. 

13124.  Assessors — compensation. 

13125.  State  auditor  to  furnish  forms,  etc. 

13126.  Powers  and  duties  of  boards  of  equali- 
zation, etc. 

13127.  Delinquent — when. 

13128.  False  returns — penalty. 

13129.  Assessor  may  allow  further  time — 
when. 

13130.  False  returns  by  corporations,  etc. — 
penalty. 

13131.  False  returns  with  intent  to  evade  or 
defraud — penalty. 

13132.  False  returns — individuals — penalty. 

13133.  Powers  of  assessors. 

13134.  Governor  to  request  information  con- 
cerning federal  incomes. 

13135.  Officers  not  to  divulge,  etc. — penalty. 

13136.  Returns  to  be  destroyed — when. 


Be  it  enacted  by  the  General  Assembly  of  the  State  of  Missouri , as  follows: 


1 


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Section  13106.  Rates — levied,  when. — There  shall  be  levied, 
assessed,  collected  and  paid  annually  upon  the  entire  net  income 
received  in  the  calendar  year  nineteen  hundred  nineteen  from 
all  sources  by  every  individual,  a citizen  or  resident  of  this  state, 
a tax  of  one  and  one-half  per  centum  upon  such  income;  and  a 
like  tax  shall  be  levied,  assessed,  collected  and  paid  annually 
upon  the  entire  net  income  received  in  the  year  nineteen  hun- 
dred nineteen  from  all  sources  within  this  state  by  every  indi- 
vidual, a non-resident,  including  interest  on  bonds,  notes  or 
other  interest-bearing  obligations  of  residents,  corporate  or 
otherwise.  The  foregoing  tax  shall  apply  to  the  entire  net  in- 
come, except  as  hereinafter  provided,  received  by  every  taxable 
person  in  the  year  nineteen  hundred  nineteen,  and  in  each  cal- 
endar year  thereafter;  provided , however , that  the  taxes  collected 
under  this  chapter  shall  for  the  year  1922  and  subsequent  years 
be  levied,  assessed,  collected  and  paid  annually  at  the  rate  of 
one  per  cent:  Provided  further,  that  for  that  part  of  the  cal- 
endar year  1921  which  shall  not  have  expired  at  the  date  this 
act  shall  take  effect  said  taxes  shall  be  levied,  assessed  and  col- 
lected at  the  rate  of  one-half  of  one  per  cent. 


(3) 


4 


INCOME  TAX  REGULATIONS. 


Sec.  13107.  Incomes — includes  what — classes. — (a)  That, 
subject  only  to  such  exemptions  and  deductions  as  are  herein- 
after allowed,  the  net  income  of  a taxable  person  shall  include 
gains,  profits,  and  income  derived  from  salaries,  wages  or  com- 
pensation for  personal  service  of  whatever  kind  and  in  whatever 
form  paid,  or  from  professions,  vocations,  business,  trade,  com- 
merce, or  sales,  or  dealings  in  property,  whether  real  or  personal, 
growing  out  of  the  ownership  or  the  use  of  or  interest  in  real  or 
personal  property,  also  from  interest,  rent,  dividends,  securities, 
or  the  transaction  of  any  business  carried  on  for  gain  or  profit, 
or  gains  or  profits  and  income  derived  from  any  source  whatever. 

(b)  Income  received  by  estates  of  deceased  persons  during 
the  period  of  administration  or  settlement,  of  the  estate,  shall 
be  subject  to  the  tax  and  taxed  to  their  estates,  and  also  such 
income  of  estates  or  any  kind  of  property  held  in  trust,  including 
such  income  accumulated  in  trust  for  the  benefit  of  unborn  or 
ascertained  persons,  or  persons  with  contingent  interests  and 
income  held  for  future  distribution  under  the  terms  of  the  will 
or  trust  shall  be  likewise  taxed,  the  tax  in  each  instance,  except 
when  the  income  is  returned  for  the  purpose  of  the  tax  by  the 
beneficiary,  to  be  assessed  to  the  executor,  administrator,  or 
trustee,  as  the  case  may  be:  Provided , that  where  the  income 
is  to  be  distributed  annually  or  regularly  between  existing  heirs 
or  legatees,  or  beneficiaries  the  rate  of  tax  and  method  of  com- 
puting the  same  shall  be  based  in  each  case  upon  the  amount  of 
the  individual  share  to  be  distributed.  Such  trustees,  executors, 
administrators,  and  other  fiduciaries  are  hereby  indemnified 
against  the  claims  or  demands  of  every  beneficiary  for  all  pay- 
ments of  taxes  which  they  shall  be  required  to  make  under  the 
provisions  of  this  act,  and  they  shall  have  credit  for  the  amount 
of  such  payments  against  the  beneficiary  or  principal  in  any 
accounting  which  they  make  as  such  trustees  or  other  fiduciaries. 

(c)  For  the  purpose  of  ascertaining  the  gain  derived  from 
the  sale  or  other  disposition  of  property,  real,  personal,  or  mixed, 
acquired  before  July  1st,  nineteen  hundred  seventeen,  the  fair 
market  price  or  value  of  such  property  as  of  July  1st,  nineteen 
hundred  and  seventeen,  shall  be  the  basis  for  determining  the 
amount  of  such  gain  derived. 

Sec.  13108.  Incomes  defined  for  purposes  of  this  act. — For 

the  purpose  of  this  tax,  the  taxable  income  of  any  individual  shall 
include  the  share  to  which  he  would  be  entitled  of  the  gains  and 
profits,  if  divided  or  distributed,  whether  divided  or  distributed 
or  not,  of  all  corporations,  joint-stock  companies  or  associations, 
or  insurance  companies,  however  created  or  organized,  formed  or 
fraudulently  availed  of  for  the  purpose  of  preventing  the  imposi- 
tion of  such  tax  through  the  medium  of  permitting  such  gains  and 
profits  to  accumulate  instead  of  being  divided  or  distributed; 
and  the  fact  that  any  such  corporation,  joint-stock  company, 
or  association,  or  insurance  company,  is  a mere  holding  com- 
pany, or  that  the  gains  and  profits  are  permitted  to  accumulate 


INCOME  TAX  REGULATIONS. 


5 


beyond  the  reasonable  needs  of  the  business,  shall  be  prima  facie 
evidence  of  a fraudulent  purpose  to  escape  such  tax;  but  the  fact 
that  the  gains  or  profits  are  in  any  case  permitted  to  accumulate 
and  become  surplus  shall  not  be  construed  as  evidence  of  a pur- 
pose to  escape  the  said  tax  in  such  case  unless  the  state  auditor 
shall  certify  that  in  his  opinion  such  accumulation  is  unreasonable 
for  the  purposes  of  the  business.  When  requested  by  the  assessor 
such  corporation,  joint-stock  company  or  association,  or  insur- 
ance company  shall  forward  to  him  a correct  statement  of  such 
gains  and  profits  and  the  names  and  addresses  of  the  individuals 
or  shareholders  who  would  be  entitled  to  the  same  if  divided  or 
distributed. 

Sec.  13109.  Exemptions. — The  following  income  shall  be  ex- 
empt from  the  provisions  of  this  act:  The  proceeds  of  life  insurance 
policies  paid  to  the  individual  beneficiaries  upon  the  death  of  the 
insured;  the  amount  received  by  the  insured,  as  a return  of  pre- 
mium or  premiums  paid  by  him  under  life  insurance,  endowment, 
or  annuity  contracts,  either  during  the  term  or  at  the  maturity 
of  the  term  mentioned  in  the  contract  or  upon  the  surrender  of 
the  contract;  the  value  of  property  acquired  by  gift,  bequest, 
devise,  or  descent  (but  the  income  from  such  property  shall  be 
included  as  income);  interest  upon  the  obligations  of  a state  or 
any  political  subdivision  thereof  or  upon  the  obligations  of  the 
United  States  or  its  possessions;  the  compensation  of  public 
officers  for  public  service  shall  not  be  computed  as  a part  of  the 
taxable  income  in  such  cases  where  the  taxation  thereof  would 
be  repugnant  to  the  Constitution. 

Sec.  13110.  Deductions  allowed. — That  in  computing  net 
income  in  the  case  of  a citizen  or  resident  of  this  state,  for  the 
purpose  of  the  tax  there  shall  be  allowed  as  deductions: 

First.  The  necessary  expenses  actually  paid  in  carrying 
on  any  business  or  trade,  not  including  personal,  living,  or 
family  expenses; 

Second.  All  interest  paid  within  the  year  on  his  indebted- 
ness; 

Third.  Taxes  paid  within  the  year  imposed  by  the  authority 
of  the  United  States,  or  its  territories,  or  possessions,  or  under 
authority  of  any  state,  county,  school  district,  or  municipality, 
or  other  ta'xing  subdivision  of  any  state,  not  including  those 
assessed  against  local  benefits; 

Fourth.  Losses  actually  sustained  during  the  year,  incurred 
in  his  business  or  trade,  or  arising  from  fires,  storms,  shipwreck, 
or  other  casualty,  and  from  theft,  when  such  losses  are  not  com- 
pensated for  by  insurance  or  otherwise:  Provided. , that  for  the 
purpose  of  ascertaining  the  loss  sustained  from  the  sale  or  other 
disposition  of  property,  real,  personal,  or  mixed,  acquired  before 
July  first,  nineteen  hundred  and  seventeen,  the  fair  market  price 
or  value  of  such  property  as  of  July  first,  nineteen  hundred  and 


6 


INCOME  TAX  REGULATIONS. 


seventeen,  shall  be  the  basis  for  determining  the  amount  of  such 
loss  sustained; 

Fifth.  In  transactions  entered  into  for  profit  but  not  con- 
nected with  his  business  or  trade,  the  losses  actually  sustained 
therein  during  the  year  to  an  amount  not  exceeding  the  profits 
arising  therefrom; 

Sixth.  Debts  due  the  taxpayer  actually  ascertained  to  be 
worthless  and  charged  off  within  the  year; 

Seventh.  A reasonable  allowance  for  the  exhaustion,  wear 
and  tear  of  property  arising  out  of  its  use  or  employment  in  the 
business  or  trade; 

Eighth,  (a)  In  the  case  of  oil  and  gas  wells  a reasonable 
allowance  for  actual  reduction  in  flow  and  production  to  be 
ascertained  not  by  the  flush  flow,  but  by  the  settled  production 
or  regular  flow;  (b)  in  the  case  of  mines  a reasonable  allowance 
for  depletion  thereof,  not  to  exceed  the  market  value  in  the  mine 
of  the  product  thereof,  which  has  been  mined  and  sold  during 
the  year  for  which  the  return  and  computation  are  made,  such 
reasonable  allowance  to  be  made  in  the  case  of  both  (a)  and  (b) 
under  rules  and  regulations  to  be  prescribed  by  the  auditor  of 
the  state:  Provided,  that  when  the  allowances  authorized  in  (a) 
and  (b)  shall  equal  the  capital  originally  invested,  or  in  case  of 
purchase  made  prior  to  July  first,  nineteen  hundred  and  seven- 
teen, the  fair  market  value  as  of  that  date,  no  further  allowance 
shall  be  made.  No  deductions  shall  be  allowed  for  any  amount 
paid  out  for  new  buildings,  permanent  improvements,  or  better- 
ments, made  to  increase  the  value  of  any  property  or  estate, 
and  no  deduction  shall  be  made  for  any  amount  of  expense  of 
restoring  property  or  making  good  the  exhaustion  thereof  for 
which  an  allowance  is  or  has  been  made. 

Ninth.  For  the  purpose  of  this  tax,  the  income  embraced 
in  a personal  return  shall  be  credited  with  the  amount  received 
as  dividends  upon  the  stock  or  from  the  net  earnings  of  any  cor- 
poration, joint-stock  company,  or  association,  trustee,  or  insur- 
ance company,  which  is  taxable  upon  its  net  income  as  hereinafter 
provided;  a like  credit  shall  be  allowed  as  to  the  amount  of  income, 
the  tax  upon  which  has  been  paid  or  withheld  for  payment  at 
the  source  of  income  under  the  provisions  of  this  title. 

Tenth.  Contributions  or  gifts  made  within  the  taxable 
year  to  corporations,  associations  and  societies  organized  and 
operated  exclusively  for  religious,  charitable,  scientific  or  edu- 
cational purposes,  or  for  the  prevention  of  cruelty  to  children  or 
animals,  no  part  of  the  net  earnings  of  which  inures  to  the  ben- 
efit of  any  private  stockholder  or  individual,  to  an  amount  not 
in  excess  of  fifteen  per  centum  of  the  taxpayer’s  net  income  as 
computed  without  the  benefit  of  this  paragraph. 

Eleventh.  All  sums,  paid  within  the  taxable  year,  by  a 
resident  of  this  state,  as  taxes  assessed  and  levied  by  any  other 
state  as  income  taxes  on  property  of  nonresidents  shall  be  de- 
ducted from  the  amount  of  the  income  tax  required  by  this  act; 


INCOME  TAX  REGULATIONS. 


7 


Provided , such  credit  shall  be  limited  to  the  amount  such  taxes 
would  have  been,  if  they  had  been  assessed  and  levied  at  the 
rate  of  such  taxation  prescribed  by  this  act. 

Sec.  13111.  Exemptions — deductions,  etc.,  of  married  per- 
sons.— That  for  the  purpose  of  this  tax  there  shall  be  allowed  as  an 
exemption  in  the  nature  of  a deduction  from  the  amount  of  the 
net  income  of  each  said  person,  ascertained  as  provided  herein, 
the  sum  of  $1,000,  plus  $1,000  additional  if  the  person  making  the 
return  be  the  head  of  the  family,  or  a married  man  with  a wife 
living  with  him,  or  plus  the  sum  of  $1,000  additional  if  the  person 
making  the  return  be  a married  woman  with  a husband  living 
with  her;  but  in  no  event  shall  this  additional  exemption  of  $1,000 
be  deducted  by  both  a husband  and  a wife;  provided  that  only 
one  deduction  of  $2,000  shall  be  made  from  the  aggregate  income 
of  both  husband  and  wife  when  living  together:  Provided  fur- 
ther, that  if  the  person  making  the  return  is  the  head  of  a family 
there  shall  be  an  additional  exemption  of  $200.00  for  each  child 
dependent  upon  such  person,  if  under  eighteen  years  of  age,  or  if 
incapable  of  self-support  because  mentally  or  physically  defective, 
but  this  provision  shall  operate  only  in  the  case  of  one  parent  in 
the  same  family:  Provided , further,  that  guardians  or  trustees 
shall  be  allowed  to  make  this  personal  exemption  as  to  income 
derived  from  the  property  of  which  such  guardian  or  trustee  has 
charge  in  favor  of  each  ward  or  cestui  que  trust:  Provided, 
further,  that  in  no  event  shall  a ward  or  cestui  que  trust  be  allowed 
a greater  personal  exemption  than  $1,000.00,  or,  if  married, 
$2,000.00  as  provided  in  this  paragraph,  from  the  amount  of  net 
income  received  from  all  sources.  There  shall  also  be  allowed  an 
exemption  from  the  amount  of  the  net  income  of  estates  of  de- 
ceased persons  during  the  period  of  administration  or  settlement, 
and  of  trust  or  other  estates  the  income  of  which  is  not  distributed 
annually  or  regularly  under  the  provisions  of  paragraph  (b), 
section  13107,  the  sum  of  $1,000,  including  such  deductions  as  are 
allowed  under  section  13110.  A non-resident  individual  may  re- 
ceive the  benefit  of  the  exemption  provided  for  in  this  section  only 
by  filing  or  causing  to  be  filed  with  the  assessor  a true  and  accurate 
return  of  his  total  income,  received  from  all  sources,  corporate 
or  otherwise,  in  this  state,  in  the  manner  prescribed  by  this  act; 
and  in  case  of  his  failure  to  file  such  return  the  collector  shall 
collect  the  tax  on  such  income,  and  all  property  belonging  to  such 
non-resident  individual  shall  be  liable  to  distraint  for  the  tax. 

Sec.  13112.  Corporations,  joint  stock  companies,  insur- 
ance companies,  etc. — That  there  shall  be  levied,  assessed,  col- 
lected and  paid  annually  upon  the  total  net  income  received  in 
the  calendar  year  nineteen  hundred  nineteen,  and  in  each  year 
thereafter,  from  all  sources  by  every  corporation,  joint  stock 
company  or  association,  except  express  companies  which  now 
pay  an  annual  tax  on  their  gross  receipts  in  this  state,  and  in- 
surance companies  which  pay  an  annual  tax  on  their  gross  pre- 
mium receipts  in  this  state,  organized  in  this  state,  no  matter 


8 


INCOME  TAX  REGULATIONS. 


how  created  or  organized,  but  not  including  partnerships,  a tax 
of  one  and  one-half  per  cent,  upon  such  income;  and  a like  tax 
shall  be  levied,  assessed,  collected  and  paid  annually  upon  the 
total  net  income  received  in  the  calendar  year  nineteen  hundred 
nineteen,  and  in  each  year  thereafter,  from  all  sources  within 
this  state  by  every  corporation,  joint  stock  company  or  associa- 
tion organized  or  existing  under  the  laws  of  another  state,  coun- 
try or  territory,  except  express  companies  which  now  pay  an 
annual  tax  on  their  gross  receipts  in  this  state,  and  insurance 
companies  which  pay  an  annual  tax  on  their  gross  premium  re- 
ceipts in  this  state,  and  except  that  in  case  a nonresident  cor- 
poration, joint  stock  company  or  association  be  engaged  in  both 
interstate  and  intrastate  business  within  this  state,  then  such 
tax  shall  be  only  upon  the  total  net  income  derived  from  the 
intrastate  business  within  this  state,  including  interest  on  bonds, 
notes  or  other  interest-bearing  obligations  of  residents,  cor- 
porate or  otherwise,  and  including  the  income  derived  from 
dividends  on  capital  stock  or  from  net  earnings  of  resident  cor- 
porations, joint  stock  companies  or  associations  whose  net  in- 
come is  taxable  under  this  article:  Provided , that  the  term 
“dividends,”  as  used  in  this  article,  shall  be  held  to  mean  any 
distribution  made  or  ordered  to  be  made  by  a corporation,  joint 
stock  company  or  association  out  of  its  earnings  or  profits  ac- 
crued since  January  first,  nineteen  hundred  and  nineteen,  and 
payable  to  its  shareholders,  whether  in  cash  or  in  stock  of  the 
corporation,  joint  stock  company  or  association,  which  stock 
dividend  shall  be  considered  income,  to  the  amount  of  its  cash 
value.  The  foregoing  tax  rate  shall  apply  to  the  total  net  in- 
come received  by  every  taxable  corporation,  joint  stock  com- 
pany or  association  in  the  calendar  year  nineteen  hundred  and 
nineteen,  and  each  year  thereafter,  except  that  if  it  has  fixed 
its  own  fiscal  year  under  the  provisions  of  existing  law,  the  fore- 
going rate  shall  apply  to  the  proportion  of  the  total  net  income 
returned  for  the  fiscal  year  ending  prior  to  December  thirty- 
first,  nineteen  hundred  nineteen,  which  the  period  between  Jan- 
uary first,  nineteen  hundred  nineteen,  and  the  end  of  such  fiscal 
year  bears  to  the  whole  of  such  fiscal  year,  and  the  rate  fixed 
shall  apply  to  the  remaining  portion  of  the  total  net  income 
returned  for  such  fiscal  year.  For  the  purpose  of  ascertaining 
the  gain  derived  or  loss  sustained  from  the  sale  or  other  disposi- 
tion by  a corporation,  joint  stock  company  or  association  of 
property,  real,  personal  or  mixed,  acquired  before  January 
first,  nineteen  hundred  and  nineteen,  the  - fair  market  price  or 
value  of  such  property  as  of  January  first,  nineteen  hundred  and 
nineteen,  shall  be  the  basis  for  determining  the  amount  of  such 
gain  derived  or  loss  sustained:  Provided , however , that  the 
taxes  collected  under  this  chapter  shall  for  the  years  1922 
and  subsequent  years  be  levied,  assessed,  collected  and  paid 
annually  at  the  rate  of  one  per  cent.:  Provided  further,  that  for 
that  part  of  the  calendar  year  1921  which  shall  not  have  expired 


INCOME  TAX  REGULATIONS. 


9 


at  the  date  this  act  shall  take  effect  said  taxes  shall  be  levied, 
assessed  and  collected  at  the  rate  of  one-half  of  one  per  cent. 

Sec.  13113.  Incomes  exempt,  etc. — (a)  That  there  shall 
not  be  taxed  under  this  act  any  income  received  by  any — 

First.  Labor,  agricultural,  or  horticultural  organization; 

Second.  Mutual  savings  bank  not  having  a capital  stock 
represented  by  shares; 

Third.  Fraternal  beneficiary  society,  order  or  association, 
operating  under  the  lodge  system  or  for  the  exclusive  benefit 
of  the  members  of  a fraternity  itself  operating  under  the  lodge 
system,  and  providing  for  the  payment  of  life,  sick,  accident,  or 
other  benefits  to  the  members  of  such  society,  order,  or  associa- 
tion or  their  dependents; 

Fourth.  Domestic  building  and  loan  associations,  and  co- 
operative banks  without  capital  stock  organized  and  operated 
for  mutual  purposes  and  without  profit; 

Fifth.  Cemetery  company  owned  and  operated  exclusively 
for  the  benefit  of  its  members; 

Sixth.  Corporation  or  association  organized  and  operated 
exclusively  for  religious,  charitable,  scientific,  or  educational 
purposes,  no  part  of  the  net  income  of  which  inures  to  the  benefit 
of  any  private  stockholder  or  individual; 

Seventh.  Business  league,  chamber  of  commerce,  or  board 
of  trade,  not  organized  for  profit  and  no  part  of  the  net  income  of 
which  inures  to  the  benefit  of  any  private  stockholder  or  in- 
dividual; 

Eighth.  Civic  league  or  organization  not  organized  for 
profit  but  operated  exclusively  for  the  promotion  of  social  wel- 
fare; 

Ninth.  Club  organized  and  operated  exclusively  for  pleas- 
ure, recreation,  and  other  non-profitable  purposes,  no  part  of 
the  net  income  of  which  inures  to  the  benefit  of  any  private 
stockholder  or  member; 

Tenth.  Farmers’  or  other  mutual  hail,  cyclone,  or  fire 
insurance  company,  mutual  ditch  or  irrigation  company,  mutual 
or  co-operative  telephone  company  or  like  organization  of  a 
purely  local  character,  the  income  of  which  consists  solely  of 
assessments,  dues,  and  fees  collected  from  members  for  the  sole 
purpose  of  meeting  its  expenses; 

Eleventh.  Farmers’,  fruit  growers’,  or  like  association, 
organized  and  operated  as  a sales  agent  for  the  purpose  of 
marketing  the  products  of  its  members  and  turning  back  to 
them  the  proceeds  of  sales,  less  the  necessary  selling  expenses, 
on  the  basis  of  the  quantity  of  produce  furnished  by  them; 

Twelfth.  Corporation  or  association  organized  for  the  ex- 
clusive purpose  of  holding  title  to  property,  collecting  income 
therefrom,  and  turning  over  the  entire  amount  thereof,  less 
expenses,  to  an  organization  which  itself  is  exempt  from  the  tax 
imposed  by  this  title;  or 


10 


INCOME  TAX  REGULATIONS. 


Thirteenth.  Federal  land  banks  and  national  farm-loan 
associations,  as  provided  in  section  26  of  the  act  of  Congress 
approved  July  seventeenth,  nineteen  hundred  and  sixteen,  en- 
titled “An  act  to  provide  capital  for  agricultural  development, 
to  create  standard  forms  of  investment  based  upon  farm  mort- 
gage, to  equalize  rates  of  interest  upon  farm  loans,  to  furnish 
a market  for  United  States  bonds,  to  create  government  de- 
positaries and  financial  agents  for  the  United  States,  and  for 
other  purposes;” 

Fourteenth.  Joint-stock  land  banks  as  to  income  derived 
from  bonds  or  debentures  or  other  joint-stock  land  banks  or  any 
federal  land  bank  belonging  to  such  joint-stock  land  bank. 

(b)  There  shall  not  be  taxed  under  this  act  any  income 
derived  from  any  public  utility  performing  functions  of  national 
government  or  those  incident  to  the  state  or  any  political  sub- 
division thereof,  or  from  the  exercise  of  any  essential  govern- 
mental function  accruing  to  any  state,  territory  or  the  District 
of  Columbia,  provided , that  whenever  any  state,  territory,  or 
the  District  of  Columbia,  or  any  political  subdivision  of  a state 
or  territory,  has,  prior  to  the  passage  of  this  act,  entered  in  good 
faith  into  a contract  with  any  person  or  corporation,  the  object 
and  purpose  of  which  is  to  acquire,  construct,  operate,  or  main- 
tain a public  utility,  no  tax  shall  be  levied  under  the  provisions 
of  this  act  upon  the  income  derived  from  the  operation  of  such 
public  utility,  so  far  as  the  payment  thereof  will  impose  a loss 
or  burden  upon  such  state,  territory,  or  the  District  of  Columbia, 
or  a political  subdivision  of  this  state;  but  this  provision  is  not 
intended  to  confer  upon  such  person  or  corporation  any  financial 
gain  or  exemption  or  to  relieve  such  person  or  corporation  from 
the  payment  of  a tax  as  provided  for  in  this  act  upon  the  part  or 
portion  of  the  said  income  to  which  such  person  or  corporation 
shall  be  entitled  under  such  contract. 

Sec.  13114.  Income  of  corporations,  joint-stock  companies, 
associations  and  insurance  companies  ascertained — how. — (a) 
In  the  case  of  a corporation,  joint-stock  company  or  association, 
or  insurance  company,  organized  in  the  state,  such  net  income 
shall  be  ascertained  by  deducting  from  the  gross  amount  of  its 
income  received  within  the  year  from  all  sources — 

First.  All  the  ordinary  and  necessary  expenses  paid  within 
the  year  in  the  maintenance  and  operation  of  its  business  and 
properties,  including  rentals  or  other  payments  required  to  be 
made  as  a condition  to  the  continued  use  or  possession  of  property 
to  which  the  corporation  has  not  taken  or  is  not  taking  title, 
or  in  which  it  has  no  equity. 

Second.  All  losses  actually  sustained  and  charged  off  within 
the  year  and  not  compensated  by  insurance  or  otherwise,  includ- 
ing a reasonable  allowance  for  the  exhaustion,  wear  and  tear  of 
property  arising  out  of  its  use  of  employment  in  the  business  or 
trade;  (a)  in  the  case  of  oil  and  gas  wells  a reasonable  allowance 
for  actual  reduction  in  flow  and  production,  to  be  ascertained 


INCOME  TAX  REGULATIONS. 


11 


not  by  the  flush  flow  but  by  the  settled  production  or  regular 
flow;  (b)  in  the  case  of  mines  a reasonable  allowance  for  depletion 
thereof  not  to  exceed  the  market  value  in  the  mine  of  the  produce 
thereof  which  has  been  mined  and  sold  during  the  year  for  which 
the  return  and  computation  are  made,  such  reasonable  allowance 
to  be  made  in  the  case  of  both  (a)  and  (b)  under  rules  and  regu- 
lations to  be  prescribed  by  the  state  auditor:  Provided , that 
when  the  allowance  authorized  in  (a)  and  (b)  shall  equal  the 
capital  originally  invested,  or  in  case  of  purchase  made  prior  to 
July  first,  nineteen  hundred  and  seventeen,  the  fair  market 
value  as  of  that  date,  no  further  allowance  shall  be  made;  and 
(c)  in  the  case  of  insurance  companies,  the  net  addition,  if  any, 
required  by  law  to  be  made  within  the  year  to  reserve  funds  and 
the  sums  other  than  dividends  paid  within  the  year  on  policy 
and  annuity  contracts:  Provided , that  no  deduction  shall  be 
allowed  for  any  amount  paid  out  for  new  buildings,  permanent 
improvements,  or  betterments  made  to  increase  the  value  of  any 
property  or  estate,  and  no  deduction  shall  be  made  for  any 
amount  of  expense  of  restoring  property  or  making  good  the 
exhaustion  thereof  for  which  an  allowance  is  or  has  been  made: 
Provided  further,  that  mutual  fire  and  mutual  employers’  liability 
and  mutual  workmen’s  compensation  and  mutual  casualty  insur- 
ance companies  requiring  their  members  to  make  premium  de- 
posits to  provide  for  losses  and  expenses  shall  not  return  as 
income  any  portion  of  the  premium  deposits  returned  to  their 
policyholders,  but  shall  return  as  taxable  income  all  income 
received  by  them  from  all  other  sources  plus  such  portions  of  the 
premium  deposits  as  are  retained  by  the  companies  for  purposes 
other  than  the  payment  of  losses  and  expenses  and  reinsurance 
reserves:  Provided  further,  that  mutual  marine  insurance  com- 
panies shall  include  in  their  return  of  gross  income  premiums 
collected  and  received  by  them  less  amounts  paid  for  reinsurance, 
but  shall  be  entitled  to  include  in  deductions  from  gross  income 
amounts  repaid  to  policyholders  on  account  of  premiums  pre- 
viously paid  by  them  and  interest  paid  upon  such  amounts 
between  the  ascertainment  thereof  and  the  payment  thereof, 
and  life  insurance  companies  shall  not  include  as  income  in  any 
year  such  portion  of  any  actual  premium  received  from  any 
individual  policyholder  as  shall  have  been  paid  back  or  credited 
to  such  individual  policyholder,  or  treated  as  an  abatement  of 
premium  of  such  individual  policyholder,  within  such  year. 

Third.  The  amount  of  interest  paid  within  the  year  on  its 
indebtedness  to  an  amount  of  such  indebtedness  not  in  excess 
of  the  sum  of  (a)  the  entire  amount  of  the  paid-up  capital  stock 
outstanding  at  the  close  of  the  year,  or,  if  no  capital  stock,  the 
entire  amount  of  capital  employed  in  the  business  at  the  close  of 
the  year,  and  (b)  one-half  of  its  interest-bearing  indebtedness 
then  outstanding;  provided , that  for  the  purpose  of  this  act  pre- 
ferred capital  stock  shall  not  be  considered  interest-bearing  in- 
debtedness, and  interest  or  dividends  paid  upon  this  stock  shall 


12 


INCOME  TAX  REGULATIONS. 


not  be  deductible  from  gross  income;  provided,  further , that  in 
cases  wherein  shares  of  capital  stock  are  issued  without  par  or 
nominal  value,  the  amount  of  paid-up  capital  stock,  within  the 
meaning  of  this  section,  as  represented  by  such  shares,  will  be 
the  amount  of  cash,  or  its  equivalent,  paid  or  transferred  to  the 
corporation,  as  a consideration  for  such  shares;  provided  further , 
that  in  the  case  of  indebtedness  wholly  secured  by  property 
collateral,  tangible  or  intangible,  the  subject  of  sale  or  hypothe- 
cation in  the  ordinary  business  of  such  corporation,  joint-stock 
company  or  association  as  a dealer  only  in  the  property  consti- 
tuting such  collateral,  or  in  loaning  the  funds  thereby  procured, 
the  total  interest  paid  by  such  corporation,  company,  or  associa- 
tion within  the  year  on  any  such  indebtedness  may  be  deducted 
as  a part  of  its  expenses  of  doing  business,  but  interest  on  such 
indebtedness  shall  only  be  deductible  on  an  amount  of  such 
indebtedness  not  in  excess  of  the  actual  value  of  such  property 
collateral;  provided  further , that  in  the  case  of  bonds  or  other 
indebtedness,  which  have  been  issued  with  a guaranty  that  the 
interest  payable  thereon  shall  be  free  from  taxation,  no  deduc- 
tion for  the  payment  of  the  tax  therein  imposed,  or  any  other 
tax  paid  pursuant  to  such  guaranty,  shall  be  allowed;  and  in  the 
case  of  a bank,  banking  association,  loan  or  trust  company, 
interest  paid  within  the  year  on  deposits  or  on  moneys,  received 
for  investment  and  secured  by  interest-bearing  certificates  of 
indebtedness  issued  by  such  bank,  banking  association,  loan  or 
trust  company. 

Fourth.  Taxes  paid  within  the  year  imposed  by  an  au- 
thority of  the  United  States,  or  its  territories  or  possessions,  or 
any  foreign  country,  or  under  the  authority  of  any  state,  county, 
school  district,  or  municipality,  or  other  taxing  subdivision  of 
any  state,  not  including  those  assessed  against  local  benefits. 

(b)  In  the  case  of  a corporation,  joint-stock  company,  or 
association,  organized,  authorized,  or  existing  under  the  laws  of 
any  other  state,  such  net  income  shall  be  ascertained  by  deduct- 
ing from  the  gross  amount  of  its  income  received  within  the  year 
from  all  sources  within  the  state — 

First.  All  the  ordinary  and  necessary  expenses  actually 
paid  within  the  year  out  of  earnings  in  the  maintenance  and 
operation  of  its  business  and  property  within  the  state,  including 
rentals  or  other  payments  required  to  be  made  as  a condition 
to  the  continued  use  or  possession  of  property  to  which  the  cor- 
poration has  not  taken  or  is  not  taking  title,  or  in  which  it  has 
no  equity. 

Second.  All  losses  actually  sustained  within  the  year  in 
business  or  trade  conducted  by  it  within  the  state  and  not  com- 
pensated by  insurance  or  otherwise,  including  a reasonable  allow- 
ance for  the  exhaustion,  wear  and  tear  of  property  arising  out  of 
its  use  or  employment  in  the  business  or  trade;  (a)  and  in  the 
case  of  oil  and  gas  wells  a reasonable  allowance  for  actual  reduc- 
tion in  flow  and  production  to  be  ascertained  not  by  the  flush 


INCOME  TAX  REGULATIONS. 


13 


flow,  but  by  the  settled  production  or  regular  flow;  (b)  in  the 
case  of  mines  a reasonable  allowance  for  depletion  thereof  not 
to  exceed  the  market  value  in  the  mine  of  the  product  thereof 
which  has  been  mined  and  sold  during  the  year  for  which  the 
return  and  computation  are  made,  such  reasonable  allowance  to 
be  made  in  the  case  of  both  (a)  and  (b)  under  rules  and  regula- 
tions to  be  prescribed  by  the  state  auditor:  Provided , that  when 
the  allowance  authorized  in  (a)  and  (b)  shall  equal  the  capital 
originally  invested,  or  in  case  of  purchase  made  prior  to  July 
first,  nineteen  hundred  and  seventeen,  the  fair  market  value  as 
of  that  date,  no  further  allowance  shall  be  made;  and  (c)  in  the 
case  of  insurance  companies  the  net  addition,  if  any,  required 
by  law  to  be  made  within  the  year  to  reserve  funds  and  the  sums 
other  than  dividends  paid  within  the  year  on  policy  and  annuity 
contracts;  provided , that  no  deduction  shall  be  allowed  for  any 
amount  paid  out  for  new  buildings,  permanent  improvements, 
or  betterments,  made  to  increase  the  value  of  any  property 
or  estate,  and  no  deduction  shall  be  made  for  any  amount  of 
expense  of  restoring  property  or  making  good  the  exhaustion 
thereof  for  which  an  allowance  is  or  has  been  made:  Provided 
further , that  mutual  fire  and  mutual  employers’  liability  and  mu- 
tual workmen’s  compensation  and  mutual  casualty  insurance 
companies  requiring  their  members  to  make  premium  deposits 
to  provide  for  losses  and  expenses  shall  not  return  as  income  any 
portion  of  the  premium  deposits  returned  to  their  policyholders, 
but  shall  return  as  taxable  income  all  income  received  by  them 
from  all  other  sources  plus  such  portions  of  the  premium  deposits 
as  are  retained  by  the  companies  for  purposes  other  than  the 
payment  of  losses  and  expenses  and  reinsurance  reserves:  Pro- 
vided, further,  that  mutual  marine  insurance  companies  shall 
include  in  their  return  of  gross  income  gross  premiums  collected 
and  received  by  them  less  amounts  paid  for  reinsurance,  but 
shall  be  entitled  to  include  in  deductions  from  gross  income 
amounts  repaid  to  policyholders  on  account  of  premiums  pre- 
viously paid  by  them  and  interest  paid  upon  such  amounts 
between  the  ascertainment  thereof  and  the  payment  thereof, 
and  life  insurance  companies  shall  not  include  as  income  in  any 
year  such  portion  of  any  actual  premium  received  from  any 
individual  policyholder  as  shall  have  been  paid  back  or  credited 
to  such  individual  policyholder,  or  treated  as  an  abatement  of 
premium  of  such  individual  policyholder,  within  such  year. 

. Third.  The  amount  of  interest  paid  within  the  year  on  its 
indebtedness  to  an  amount  of  such  indebtedness  not  in  excess 
of  the  proportion  of  the  sum  of  (a)  the  entire  amount  of  the  paid- 
up  capital  stock  outstanding  at  the  close  of  the  year,  or,  if  no 
capital  stock,  the  entire  amount  of  the  capital  employed  in  the 
business  at  the  close  of  the  year,  and  (b)  one-half  of  its  interest- 
bearing  indebtedness  then  outstanding,  which  the  gross  amount 
of  its  income  for  the  year  from  business  transacted  and  capital 
invested  within  the  state  bears  to  the  gross  amount  of  its  income 

3 


14 


INCOME  TAX  REGULATIONS. 


derived  from  all  sources  within  and  without  the  state:  Provided , 
that  in  the  case  of  bonds  or  other  indebtedness  which  have  been 
issued  with  a guaranty  that  the  interest  payable  thereon  shall  be 
free  from  taxation,  no  deduction  for  the  payment  of  the  tax  herein 
imposed  or  any  other  tax  paid  pursuant  to  such  guaranty  shall 
be  allowed;  and  in  case  of  a bank,  banking  association,  loan  or 
trust  company,  or  branch  thereof,  interest  paid  within  the  year 
on  deposits  by  or  on  moneys  received  for  investment  from  either 
citizens  or  residents  of  the  state,  and  secured  by  interest-bearing 
certificates  of  indebtedness  issued  by  such  bank,  banking  asso- 
ciation, loan  or  trust  company,  or  branch  thereof. 

Fourth.  Taxes  paid  within  the  year  imposed  by  the  au- 
thority of  the  United  States  or  its  territories,  or  possessions,  or 
under  the  authority  of  any  state,  county,  school  district,  or 
municipality,  or  other  taxing  subdivision,  of  any  state,  paid 
within  the  state,  not  including  those  assessed  against  local 
benefits. 

(c)  In  the  case  of  assessment  insurance  companies,  whether 
domestic  or  foreign,  the  actual  deposit  of  sums  with  state  or 
territorial  officers,  pursuant  to  law,  as  additions  to  guarantee 
or  reserve  funds  shall  be  treated  as  being  payments  required  by 
law  to  reserve  funds. 

Sec.  13115.  State  divided  into  districts — how. — For  the  pur- 
poses of  this  act  the  state  shall  be  divided  into  one  hundred  and 
fifteen  assessment  districts,  whose  boundaries  shall  coincide  and 
in  every  way  correspond  with  the  one  hundred  and  fourteen 
counties  and  the  city  of  St.  Louis  in  this  state.  The  assessors 
and  collectors  of  the  several  counties  and  the  city  of  St.  Louis 
shall  be  the  assessors  and  collectors  of  the  income  tax  of  the  dis- 
tricts in  which  they  live. 

Sec.  13116.  Incomes  assessed — how. — Every  person  who  has 
a taxable  income,  shall  on  the  first  day  of  January  of  each  year, 
or  as  soon  thereafter  as  practicable,  apply  in  person  or  by  mail, 
to  the  assessor  of  the  district  in  which  such  person  resides,  for 
a proper  blank  on  which  to  make  a return,  which  said  return 
shall  be  filed  with  the  assessor  on  or  before  the  first  of  March 
next  following.  The  assessor  shall  be  furnished  all  necessary 
printing,  stationery,  postage  and  office  equipment,  and  he  and 
his  deputies  shall  be  entitled  to  receive  their  actual  necessary 
expenses  incurred  in  the  performance  of  their  duties,  all  such 
expenditures  shall  be  audited  and  paid  out  of  the  state  or  county 
treasury  in  the  same  manner  as  other  similar  expenses  are 
audited  and  paid. 

Sec.  13117.  Assessors  to  keep  separate  book,  etc. — There 
shall  be  furnished  to  the  assessors  a separate  book  for  income  taxes 
known  as  the  “income  assessment  book”  which  shall  contain 
a list  of  the  names  of  all  persons  having  a taxable  income,  alpha- 
betically arranged,  with  proper  priority  of  vowels,  and  such  book 
may  contain  a number  of  columns  after  the  manner  of  “personal 


INCOME  TAX  REGULATIONS. 


15 


assessment  books,”  in  so  far  as  they  are  applicable  and  such 
other  columns  as  are  useful  and  convenient  in  practice. 

Sec.  13118.  Assessor  to  require  report — when. — Whenever  in 
the  judgment  of  the  assessor  any  person  in  his  district  shall  be 
subject  to  an  income  tax  under  the  provisions  of  this  act,  he  shall 
require  such  person  to  make  report  at  such  time  and  in  such 
manner  and  form  as  he  may  prescribe,  specifying  particularly 
among  other  items  the  amount  of  income  received  from  services, 
unsecured  notes,  mortgages,  bonds,  stocks  and  rent,  the  amount 
of  income  received  by  his  wife  and  child  under  eighteen  years  of 
age  residing  together  with  him  as  members  of  the  family  and 
such  other  information  as  he  shall  deem  necessary  to  enforce  the 
provisions  of  this  act. 

Sec.  13119.  Assessment  to  be  complete  and  result  certified, 
when. — The  county  or  township  assessor  shall  complete  the 
assessment  of  incomes  on  or  before  the  first  day  of  March  of  each 
year,  and  shall  thereupon  forthwith  certify  the  result  to  the 
county  clerk  or  city  auditor,  who  shall  compute  the  taxes  thereon, 
and  said  clerk  shall  enter  such  income  taxes  upon  a tax  book 
provided  for  that  purpose,  and  deliver  the  same  to  the  county 
collector  on  or  before  the  first  day  of  May  thereafter,  and  the 
taxes  shall  be  collected  and  paid  on  or  before  the  first  day  of 
June  thereafter  to  the  county  collector  and  by  him  remitted 
monthly  to  the  state  treasurer. 

Sec.  13120.  Returns — to  whom  made — how  made — when. — 
The  place  at  which  the  tax  herein  provided  for  shall  be  assessed, 
levied  and  collected  shall  be  determined  as  follows: 

First.  Persons  residing  within  the  state  shall  make  returns 
to  the  assessor  of  the  district  in  which  they  reside. 

Second.  Persons  residing  without  the  state  and  deriving 
income  from  sources  within  the  state  or  within  its  jurisdiction, 
shall  make  return  to  the  assessor  of  the  district  where  their  chief 
office  is  located  and  if  they  have  no  office  within  the  state,  they 
shall  make  application  to  the  state  auditor,  whose  duty  it  shall 
be  to  designate  the  district  in  which  they  shall  make  income 
tax  returns. 

Sec.  13121.  Assessor  to  give  bond. — Every  assessor  before 
entering  upon  the  duties  of  his  office  shall  give  bond  and  security 
to  the  state  to  the  satisfaction  of  the  county  court,  or  the  clerk 
in  vacation,  or  the  common  council  of  the  city  of  St.  Louis,  with 
three  or  more  solvent  sureties,  householders  of  the  county  or 
city,  in  a sum  not  less  than  the  annual  emolument  of  his  office, 
the  amount  to  be  fixed  by  the  court  or  clerk  or  city  auditor,  as 
the  case  may  require,  conditioned  for  the  faithful  performance 
of  the  duties  of  his  office,  which  bond  shall  be  deposited  in  the 
office  of  the  clerk  of  the  county  court,  or  city  auditor. 

Sec.  13122.  Failure  of  assessor — penalty. — Every  assessor 
who  shall  fail  to  perform  any  duty  enjoined  upon  him  by  law, 
in  the  time  prescribed,  shall  be  removed  from  office  by  the 


16 


INCOME  TAX  REGULATIONS. 


county  court  or  the  common  council  of  the  city  of  St.  Louis, 
who  shall  appoint  another  instead.  Such  new  assessor  shall  take 
a like  oath  and  give  a like  bond  as  required  of  the  first  and  the 
county  court  or  common  council  of  the  city  of  St.  Louis  shall 
order  suit  brought  upon  the  bond  of  such  delinquent  assessor, 
against  him  and  his  sureties,  for  such  amount  as  shall  be  sufficient 
to  reimburse  such  county  or  city  for  completing  and  reassessing 
such  county  or  city. 

Sec.  13123.  State  auditor  may  question  assessment — when. — 

Within  one  year  after  the  completion  of  the  income  tax  assess- 
ment, for  any  year,  the  state  auditor  may,  if  he  believes  that  the 
assessment  of  any  assessor  has  been  fraudulently,  collusively  or 
erroneously  made,  make  application  to  the  circuit  judge  of  the 
judicial  circuit  in  which  such  assessor’s  district  is  located.  The 
judge  to  whom  such  application  is  made  may  thereupon  appoint 
a competent  person,  who  is  a non-resident  of  the  district  of  such 
assessor,  to  reassess  the  income  tax  of  such  district.  Such  person 
shall  possess  the  powers,  be  subject  to  the  duties  and  receive  the 
same  compensation  as  the  regular  assessor.  The  report  of  such 
person  shall  be  filed  with  the  judge  by  whom  he  was  appointed. 
If  the  state  auditor  upon  the  examination  of  such  report,  believe 
that  criminal  proceedings  should  be  had,  he  shall  place  the  matter 
before  the  governor  who  may  direct  the  attorney-general,  or  one 
of  his  assistants,  to  aid  the  prosecuting  or  circuit  attorney  in 
enforcing  the  provisions  of  this  act. 

Sec.  13124.  Compensation  of  assessors  and  collectors. — As- 
sessors and  collectors  shall  be  compensated  in  like  manner  and 
in  like  amounts  as  for  the  assessments  of  other  taxes;  provided , 
that  in  counties  in  which  the  assessors  and  collectors  are  paid  a 
fixed  salary,  that  in  addition  to  the  salary  paid,  they  shall  be 
permitted  to  charge  for  work  performed  in  the  assessing  and  col- 
lecting of  the  income  tax,  as  provided  by  this  act,  the  same  fees 
as  are  charged  by  assessors  and  collectors  whose  salary  is  not  fixed 
by  law,  and  which  fees  are  charged  by  said  assessors  and  collectors 
for  services  rendered  in  assessing  and  collecting  the  income  tax 
shall  be  paid  by  the  state. 

Sec.  13125.  State  auditor  to  furnish  forms,  etc. — It  shall  be 
the  duty  of  the  state  auditor  to  make  out  and  forward  to  the 
clerk  or  auditor  of  each  county  and  the  auditor  of  the  city  of 
St.  Louis,  from  time  to  time,  for  the  use  of  county  and  city 
officers,  suitable  forms  for  the  return  of  income  taxes.  He  shall 
give  instructions  for  carrying  this  chapter  into  effect  and  all  such 
instructions  shall  be  strictly  complied  with  by  the  officers  in  the 
performance  of  their  duties,  as  required  by  this  chapter.  He 
shall  give  his  opinion  and  advice  on  all  questions  of  doubt  as  to 
the  true  intent  and  meaning  of  the  provisions  of  this  chapter. 

Sec.  13126.  Powers  and  duties  of  boards  of  equalization,  etc. 
The  board  of  equalization  and  the  board  of  appeals,  or  any  in- 
dividual or  body  exercising  similar  powers  and  duties,  of  any 


INCOME  TAX  REGULATIONS. 


17 


civil  or  political  subdivision  of  this  state,  shall  have  the  same 
powers  and  duties  with  respect  to  the  income  tax,  as  they  now 
have  with  respect  to  the  tax  on  personal  property,  in  so  far  as 
the  law  is  applicable,  with  the  additional  power  to  estimate 
income. 

Sec.  13127.  Tax  delinquent,  when. — For  the  purpose  of  this 
act  income  taxes  shall  become  delinquent  on  the  2nd  day  of  June 
following  the  day  when  the  tax  book  is  required  by  law  to  be  de- 
livered to  the  collector,  and  said  taxpayers  appearing  in  such 
tax  book  shall  have  the  same  penalty  assessed  against  them  as  in 
the  cases  of  other  taxes,  and  suit  shall  be  brought  and  the  taxes 
collected  in  the  same  manner  as  personal  delinquent  taxes  are  now 
collected. 

Sec.  13128.  False  returns— penalty.— In  case  any  return  made 
by  any  person  is  made  with  false  or  fraudulent  intent,  or  in  case 
of  a refusal  or  neglect  to  make  a return  as  required  by  law,  or 
an  additional  amount  is  discovered,  such  income  shall  be  subject 
to  twice  the  original  rate. 

Sec.  13129.  Assessor  may  allow  further  time — when. — In 

case  of  neglect  occasioned  by  the  sickness  or  absence  of  an  officer  of 
any  corporation,  joint-stock  company  or  association  required  to 
make  said  return,  or  for  other  sufficient  reason,  the  assessor  may 
allow  such  further  time  for  making  and  delivering  such  return 
as  he  may  deem  necessary,  not  to  exceed  thirty  days. 

Sec.  13130.  False  returns  by  corporations,  etc. — penalty. — 

If  any  of  the  corporations,  joint-stock  companies  or  associations 
aforesaid  shall  fail  or  refuse  to  make  return  at  the  time  herein- 
before specified  in  each  year,  or  shall  render  a false  or  fraudulent 
return,  such  corporation,  joint-stock  company  or  association 
shall  be  liable  to  a penalty  of  not  less  than  one  hundred  dollars 
and  not  to  exceed  five  thousand  dollars  at  the  discretion  of  the 
court. 

Sec.  13131.  False  returns  with  intent  to  evade  or  defraud — 
penalty. — Any  officer  of  a corporation,  joint-stock  company  or 
association  required  by  law  to  make,  render,  sign  or  verify  any 
return  who  makes  any  false  or  fraudulent  return  or  statement, 
with  intent  to  defeat  or  evade  the  assessment  required  by  this 
act  to  be  made,  shall  upon  conviction  be  fined  not  to  exceed  five 
hundred  dollars  or  be  imprisoned  not  to  exceed  one  year,  or  both, 
at  the  discretion  of  the  court,  with  the  cost  of  prosecution. 

Sec.  13132.  False  returns — individuals — penalty. — Any  in- 
dividual who  fails  or  refuses  to  make  a return  at  the  time  here- 
inbefore specified  in  each  year  or  shall  render  a false  or  fraudulent 
return,  shall  upon  conviction  be  fined  not  to  exceed  five  hundred 
dollars,  or  be  imprisoned  not  to  exceed  one  year,  or  both,  at  the 
discretion  of  the  court,  together  with  the  costs  of  prosecution. 


18 


INCOME  TAX  REGULATIONS. 


Sec.  13133.  Powers  of  assessors. — In  the  performance  of 
such  duty,  the  assessors  shall  possess  all  powers  now  or  hereafter 
granted  by  law  to  assessors  in  the  assessment  of  personal  prop- 
erty and  also  the  power  to  estimate  incomes. 

Sec.  13134.  Governor  to  request  information  concerning 
federal  incomes. — It  shall  be  the  duty  of  the  governor  to  request 
such  information  concerning  the  payment  of  federal  income 
taxes  by  citizens  of  this  state  as  the  federal  authorities  may  be 
willing  to  divulge. 

Sec.  13135.  Officers  not  to  divulge,  etc. — penalty. — It  shall 
be  unlawful  for  any  person,  persons  or  officer  to  divulge,  give 
out  or  impart  to  any  other  person,  or  persons,  any  information 
relative  to,  or  the  contents  of  any  income  filed  under  this  act,  or 
to  permit  any  other  person,  or  persons  not  connected  with  his 
office  to  see,  inspect  or  examine  the  same;  and  it  shall  be  unlawful 
for  any  person  or  officer  to  use  any  income  filed  under  this  in 
any  manner  whatever  in  connection  with,  or  for  the  purpose  of 
assessing  of  property  tax  or  determining  the  amount  of  assess- 
ment of  any  person  or  corporation  or  to  use  the  same  in  any 
way  in  making  up  an  assessment  roll.  It  shall  be  unlawful  for 
any  board  of  equalization,  or  any  member  thereof,  or  any  officer, 
to  in  any  way  permit  the  inspection  of  any  such  return  or  to 
use  the  same  in  any  way  in  making  assessment  other  than  the 
assessment  of  the  tax  provided  for  in  this  act  and  any  person 
violating  the  provisions  of  this  section  shall  be  deemed  guilty 
of  a felony  and  upon  conviction  thereof  shall  be  fined  a sum  of 
not  less  than  one  hundred  dollars  ($100)  and  not  more  than 
one  thousand  dollars  ($1,000)  or  imprisonment  in  the  peniten- 
tiary for  a term  of  not  less  than  two  years  and  not  more  than 
five  years,  or  both  such  fine  and  imprisonment  as  the  court 
may  deem  proper;  and  any  officer  convicted  for  the  violation  of 
this  section,  the  judgment  of  conviction  shall  be  construed  and 
held  to  be  a forfeiture  of  the  office  held  by  such  convicted  per- 
son. 

Sec.  13136.  Returns  to  be  destroyed— when. — It  shall  be  the 
duty  of  the  collector,  assessor  or  any  other  officer  of  this  state, 
having  in  his  custody  income  tax  returns,  to  destroy  the  same 
within  six  months  after  such  income  tax  becomes  due,  provided 
that  no  income  tax  return  shall  be  destroyed  before  the  tax  has 
been  paid. 


REGULATIONS. 


Regulations  concerning  the  tax  imposed  by  the 
Revised  Statutes,  1919,  as  amended  August  1, 
1921,  on  net  income  of  Individuals,  Corporations, 
Joint-stock  Companies,  Associations,  and  In- 
surance Companies. 


Office  of  the  State  Auditor. 

Jefferson  City , Mo.,  November  2, 1921. 

PART  1. 

Individual  Income  Returns  and  Collections. 

Article  1.  Section  13106  of  the  above-named  act 
imposes  a tax  of  one  and  one-half  per  centum  on  net 
incomes  arising  or  accruing  from  all  sources  during 
the  preceding  calendar  year  to — 

(a)  Every  citizen  of  the  State  of  Missouri, 
whether  residing  at  home  or  abroad;  and 

( b ) Every  person  residing  in  the  State  of  Mis- 
souri, though  not  a citizen  thereof;  and 

(c)  From  all  property  owned  and  from  every 
business,  trade,  or  profession  carried  on  in  the 
State  of  Missouri,  by  a person  residing  elsewhere. 

Art.  2.  The  NET  INCOME  shall  consist  of 
the  total  gains,  profits,  and  income  derived  from  all 
sources  (designated  as  gross  income)  less  deductions 
numbered  first  to  eleventh,  inclusive,  specifically  enu- 
merated in  Sec.  13110  of  the  act. 

In  computing  the  taxable  income  for  the  pur- 
poses of  the  tax  there  shall  be  deducted  from  the 
net  income  as  above  ascertained: 

(a)  The  amount  included  in  the  gross  income 
received  as  dividends  upon  the  stock  or  from  the  net 
earnings  of  any  corporation,  joint-stock  company, 
association,  or  insurance  company  which  is  taxable 
upon  its  net  income; 

( b ) The  specific  exemption  of  $1,000  or  $2,000, 
as  the  case  may  be. 

Art.  3.  Gross  income  includes  all  gains,  profits, 
and  income  derived  from — 


Persons  tax- 
able. 


Net  income 
defined. 


N ormal  tax ; 
upon  what  com- 
puted. 


Gross  in- 
come. What  it 
includes. 


(19) 


20 


INCOME  TAX  REGULATIONS. 


Income  e x- 
empt  from  tax- 
ation. 


Deductions 

allowed. 


(a)  Salaries,  wages,  or  compensation  for  per- 
sonal service  of  whatever  kind  and  in  whatever  form 
paid. 

(■ b ) Professions,  vocations,  business  (including 
income  from  copartnerships),  trade,  commerce,  or 
sales  or  dealings  in  property,  growing  out  of  the 
ownership  or  use  of,  or  interest  in,  real  or  personal 
property. 

(c)  Interest,  rent,  dividends,  securities,  or 
transaction  of  any  lawful  business  carried  on  for 
gain  or  profit. 

( d ) Gains  or  profits  and  income  derived  from 
any  source  whatever,  including  the  income  from,  but 
not  the  value  of,  property  acquired  by  gift,  bequest, 
devise  or  descent. 

The  foregoing  is  held  to  include  all  income, 
gains,  and  profits  arising  or  accruing  from  all  sources 
whatever  in  the  calendar  year  for  which  the  return 
is  made,  except  as  hereinafter  specifically  stated. 

Art.  4.  The  following  items  should  not  be  in- 
cluded as  gross  income: 

(a)  Value  of  property  acquired  by  gift,  be- 
quest, devise,  or  descent  during  the  year. 

( b ) Proceeds  of  life  insurance  policies  paid  upon 
the  death  of  the  person  insured  to  beneficiaries,  or 
payments  made  by  or  credited  to  the  insured,  on 
life  insurance,  endowment,  or  annuity  contracts, 
upon  the  return  thereof  to  the  insured  at  the  maturity 
of  the  term  mentioned  in  the  contract,  but  this 
shall  not  be  construed  to  mean  that  interest  pay- 
ments to  beneficiaries  from  insurance  companies 
shall  not  be  included  as  income. 

(c)  The  compensation  of  all  officers  and  em- 
ployees of  the  State  or  any  political  subdivision 
thereof,  including  public-school  teachers,  etc.,  should 
be  included. 

Art.  5.  Deductions  and  exemptions  allowed  in 
computing  taxable  income  for  the  purposes  of  the  tax . 

1.  The  amount  of  necessary  expenses  actually 
paid  for  carrying  on  business,  but  not  including 
business  expenses  of  partnerships  and  not  including 
personal,  living,  or  family  expenses. 

2.  All  interest  paid  within  the  year  on  personal 
indebtedness  of  the  taxpayer  incurred  in  the  con- 
duct of  business. 


INCOME  TAX  REGULATIONS. 


21 


3.  All  National,  State,  county,  school,  and 
municipal  taxes  paid  within  the  year  (not  including 
those  assessed  against  local  benefits). 

4.  Losses  actually  sustained  during  the  year 
incurred  in  trade  or  arising  from  fires,  storms,  or 
shipwreck  and  not  compensated  for  by  insurance  or 
otherwise. 

5.  Debts  due  to  the  taxpayer  which  have  been 
actually  ascertained  to  be  worthless  and  charged 
off  within  the  year. 

6.  Amount  representing  a reasonable  allow- 
ance for  the  exhaustion,  wear,  and  tear  of  property 
arising  out  of  its  use  or  employment  in  the  business, 
not  to  exceed,  in  the  case  of  mines,  reasonable  per 
cent  of  the  gross  value  at  the  mine  of  the  output 
for  the  year  for  which  the  computation  is  made, 
but  not  including  the  expense  of  resioring  property  or 
making  good  the  exhaustion  thereof,  for  which  an 
allowance  is  or  has  been  made,  nor  for  any  amount 
paid  for  new  buildings,  permanent  improvements, 
or  betterments,  made  to  increase  the  value  of  any 
property  or  estate. 

The  term  “gross  value  at  the  mine,”  as  used  in  paragraph  2 of  section 
9 of  the  act  of  April  12,  1917,  prescribing  a limit  to  the  amount  which  may 
be  deducted  in  the  return  of  individuals  and  corporations  as  depreciation 
in  the  case  of  mines,  is  held  to  mean  the  bona  fide  market  value  of  ore, 
coal,  crude  oil,  and  gas  at  the  mine  or  well,  where  such  value  is  established 
by  actual  sales  at  the  mine  or  well;  and  in  case  the  market  value  of  the 
product  of  the  mine  or  well  is  established  at  some  other  place  than  at  the 
mine  or  well,  or  on  the  basis  of  the  bullion  or  metallic  value  of  the  ore,  then 
the  gross  value  at  the  mine  is  held  to  be  the  value  of  the  ore,  coal,  oil,  or 
gas  sold,  or  of  the  metal  produced,  less  transportation,  reduction,  and 
smelting  charges. 

7.  The  amount  included  in  gross  income  re- 
ceived as  dividends  upon  the  stock,  or  upon  the  net 
earnings,  of  any  corporation,  joint-stock  company, 
association,  or  insurance  company  which  is  taxable 
upon  its  net  income. 

None  of  the  above  items  of  deduction  shall 
include  money  or  other  items  of  value  disposed  of 
by  gift,  donation,  or  endowment. 

Personal  exemption  of  $1,000  or  $2,000,  as  the 
case  may  be,  is  to  be  deducted  from  the  net  income 
except  in  the  cases  of  nonresident  aliens.  (See  arts. 
7,  9,  and  10.) 

Art.  6.  The  act  provides  that  the  said  normal 
tax  shall  be  computed  on  the  remainder  of  said  net 
income  accruing  during  each  preceding  calendar 
year. 


“Gross  value 
at  the  mine” 
defined. 


Gifts  or  do- 
nations made 
during  the  year 
not  to  be  de- 
ducted. 

Exemptions 

allowed. 


Tax  c o m - 
puted  on  the 
calendar  year. 


22 


INCOME  TAX  REGULATIONS. 


Specific  e x- 
emption  allow- 
ed to  single  per- 
son or  married 
persons  living 
apart. 


Specific  e x- 
emption  allow- 
ed with  respect 
to  aggregate  in- 
come of  hus- 
band and  wife. 


If  husband 
and  wife  have 
separate  estates 
one  return  may- 
be made  show- 
ing income  of 
each. 


Wife’s  return 
of  separate  es- 
tate to  be  at- 
tached to  hus- 
band’s return 
or  husband’s 
income  may  be 
included  in 
wife’s  return. 


Return  re- 
quired if  either 
husband  or  wife 
has  an  income 
of  $1,000  or 
over. 


Return  re- 
quired if  aggre- 
gate income  of 
husband  and 
wife  is  in  excess 
of  $2,000,  al- 
though neither 
may  have  an 
income  of  $1,- 
000  or  over. 


Art.  7.  Every  single  person  and  every  married 
person  not  living  with  husband  or  wife  in  the  sense 
below  defined,  who  has  a net  income  exceeding 
$1,000  per  annum,  is  liable  to  pay  the  normal 
tax  under  this  law,  but  in  making  return  for  such 
tax  such  person  may  claim  an  exemption  of  $1,000 
from  his  or  her  total  net  income. 

Art.  8.  Husband  and  wife  living  together  are 
entitled  to  an  exemption  of  $2,000  only  from  the 
aggregate  net  income  of  both,  which  may  be  de- 
ducted in  making  the  return  of  such  income  for 
taxation.  However,  when  the  husband  and  wife 
are  separated  and  living  permanently  apart  from 
each  other  each  shall  be  entitled  to  an  exemption 
of  $1,000. 

If  the  husband  and  wife  not  living  apart  have 
separate  estate,  the  income  from  both  may  be  made 
on  one  return,  but  the  amount  of  income  of  each, 
and  the  full  name  and  address  of  both,  must  be  shown 
in  such  return. 

The  husband,  as  the  head  and  legal  representa- 
tive of  the  household  and  general  custodian  of  its 
income,  should  make  and  render  the  return  of  the 
aggregate  income  of  himself  and  wife,  and  for  the 
purpose  of  levying  the  income  tax  it  is  assumed  that 
he  can  ascertain  the  total  amount  of  said  income. 

If  a wife  has  a separate  estate  managed  by 
herself  as  her  own  separate  property  and  receives 
an  income  of  $1,000  or  over,  she  may  make  return 
of  her  own  income,  and  if  the  husband  has  other 
net  income,  making  the  aggregate  of  both  incomes 
more  than  $2,000,  the  wife’s  return  should  be  at- 
tached to  the  return  of  her  husband,  or  his  income 
should  be  included  in  her  return,  in  order  that  a 
deduction  of  $2,000  may  be  made  from  the  aggregate 
of  both  incomes.  The  tax  in  such  case,  however, 
will  be  imposed  only  upon  so  much  of  the  aggregate 
income  of  both  as  shall  exceed  $2,000. 

If  either  husband  or  wife  separately  has  an  in- 
come equal  to  or  in  excess  of  $1,000,  a return  of 
annual  net  income  is  required  under  the  law,  and 
such  return  must  include  the  income  of  both,  and 
in  such  case  the  return  must  be  made  even  though 
the  combined  income  of  both  be  less  than  $2,000. 

If  the  aggregate  net  income  of  both  exceeds 
$2,000,  an  annual  return  of  their  combined  incomes 
must  be  made  in  the  manner  stated,  although 
neither  one  separately  may  have  an  income  of  $1,000 
per  annum.  They  are  jointly  and  separately  liable 
for  such  return  and  for  the  payment  of  the  tax. 


INCOME  TAX  REGULATIONS. 


23 


The  single  or  married  status  of  the  person  claim- 
ing the  specific  exemption  shall  be  determined  as  of 
the  time  of  claiming  such  exemption  if  such  claim 
be  made  within  the  year  for  which  return  is  made, 
otherwise  the  status  at  the  close  of  the  year. 

Art.  9.  His  or  her  prorata  share  of  the  net 
profits  derived  from  a partnership  business,  whether 
or  not  divided  and  paid  out,  shall  be  included  in 
the  personal  return  of  each  partner. 

Art.  10.  Partnerships,  as  such,  are  not  subject 
to  the  income  tax,  and  are  only  required  to  make 
return  when  requested  to  do  so  by  the  State  Auditor 
of  Missouri  or  the  assessor  for  the  county  or  town- 
ship in  which  said  partnership  has  its  principal  place 
of  business;  and  when  a return  is  required  it  shall 
give  a complete  and  correct  statement  of  the  gross 
income  of  the  said  partnership  and  also  a complete 
statement  of  the  actual  expenses  of  conducting  the 
business  of  said  partnership,  and  the  net  profits  and 
the  name  and  address  of  each  member  of  said  part- 
nership, and  their  respective  interest  in  the  net  profit 
thus  reported. 

Art.  11.  The  net  annual  profits  of  a partner- 
ship when  divided  and  paid  to  the  members  thereof 
shall  be  included  by  each  individual  partner  receiving 
same  in  his  annual  return  of  net  income,  and  the 
tax  shall  be  paid  thereon  as  required  by  law.  When 
the  annual  profits  of  a partnership  are  not  distributed 
and  paid  to  the  members  thereof  the  respective 
interest  of  each  member  in  said  profits  shall  be 
ascertained,  and  the  individuals  entitled  thereto 
shall  include  the  said  amount  in  their  annual  return 
as  a part  of  their  gross  income,  the  same  as  if  said 
profits  had  been  distributed  and  paid  to  them. 

Art.  12.  Undivided  annual  net  profits  of  part- 
nerships thus  returned  by  the  individual  members 
thereof,  and  tax  paid  thereon,  shall  not,  when  said 
profits  are  actually  distributed  and  paid  to  such 
members,  be  again  included  in  their  annual  return 
as  a part  of  their  gross  income. 

Returns. 

Art.  13.  Each  person  of  lawful  age  whose  net 
income  is  if  married  $2,000  or  over,  if  single  $1,000 
or  over  shall,  on  or  before  the  1st  day  of  March 
each  year  file  an  accurate  return  of  income  under 
oath  or  affirmation. 


When  status 
is  to  be  deter- 
mined. 


Interest  in 
partnership 
profit,  how  re- 
ported. 


Partnerships, 
as  such,  not 
liable  to  tax, 
but  statement 
may  be  re- 
quired. 


Partnership 
profits  to  be  in- 
cluded in  re- 
turns made  by 
individual  part- 
ners. 


Individual 

partnership 

profits. 


When  re- 
turns of  annual 
net  income  of 
S3, 000  or  over 
are  to  be  made. 


24 


INCOME  TAX  REGULATIONS. 


Where  filed. 


Form  of  re- 
turn. 


When  re- 
turn will  be 
made  by  guard- 
ian or  duly  au- 
thorized agent. 


Executor  o r 
administrator 
to  make  return 
in  case  of  death. 


Notice  of 
failure  to  file 
return  to  be 
served  on 
guardian  or 
agent. 


E v i de  nee 
may  be  filed 
showing  nonlia- 
bility t o make 
return. 


Returns  to' be 
prepared  b y 
assessor  in  cer- 
tain cases. 


If  the  person  making  the  return  of  income  has 
his  place  of  business  in  the  county  or  township  in 
which  he  resides,  the  return  shall  be  filed  with  the 
assessor  of  that  county  or  township.  If  his  principal 
place  of  business  is  elsewhere,  the  return  shall  be  filed 
in  the  county  in  which  that  business  is  located. 

In  the  case  of  an  individual  residing  in  another 
state  or  a foreign  country  return  shall  be  made  to 
the  assessor  for  the  county  where  his  principal 
business  is  carried  on  within  the  State  of  Missouri. 

Art.  14.  The  required  return  will  be  made  on 
Form  11  in  accordance  with  the  instructions  printed 
thereon,  and  will  specifically  set  forth — 

1.  All  income  received  from  each  specific  source 
and  the  total  thereof. 

2.  All  the  separate  items  of  deduction  claimed 
under  Sec.  13110  of  this  law. 

3.  The  amount  of  specific  exemption  claimed 
under  Sec.  13111. 

Art.  15.  When  by  reason  of  minority,  insanity, 
absence,  sickness,  or  other  disability,  the  individual 
is  unable  to  make  his  own  return,  the  same  shall 
be  made  by  his  guardian  or  duly  authorized  agent. 

In  the  case  of  the  death  of  a person  whose  net 
income  for  the  part  of  the  year  during  which  he 
lived  was  $1,000  or  over,  return  of  net  income  shall 
be  made  by  the  executor  or  administrator  of  the 
estate  of  the  deceased,  and  in  computing  the  taxable 
income  of  such  estate  there  shall  be  allowed  the 
specific  exemption  provided  by  law. 

Art.  16.  When  the  required  return  has  not 
been  made  by  a person  acting  as  guardian,  agent  of 
a nonresident  alien,  or  by  one  acting  in  any  other 
capacity  in  which  the  law  makes  it  a duty  for  him 
to  represent  the  individual,  notice  of  failure  to  make 
such  return  will  be  served  upon  such  guardian  or 
agent. 

The  person  upon  whom  such  notice  is  served 
may,  however,  when  the  facts  warrant,  file  evidence 
with  the  assessor  showing  that  the  individual  for 
whom  he  acts  did  not  receive  an  income  subject  to 
tax  during  the  year,  or  that  the  said  guardian  or 
agent  had  filed  the  return  with  some  other  assessor. 

Art.  17.  If  any  person  liable  to  pay  an  income 
tax  for  himself  or  others  shall  fail  to  make  and  deliver 
the  return  required  by  law,  but  shall  consent  to 
disclose  the  particulars  of  any  business  or  occupa- 
tion liable  to  pay  such  tax,  it  shall  be  the  duty  of 
the  assessor  or  deputy  assessor  to  make  such  list  or 


INCOME  TAX  REGULATIONS. 


25 


return,  which  being  distinctly  read  and  consented 
to,  signed,  and  verified  by  oath  or  affirmation  by 
the  person  liable  to  make  such  return,  the  same  may 
be  received  as  the  list  or  return  of  such  person. 

Art.  18.  In  case  any  person  liable  to  make  re- 
turn shall  neglect  or  refuse  to  make  or  render  a list 
or  return,  or  shall  render  a willfully  false  or  fraudulent 
return,  it  shall  be  the  duty  of  the  assessor,  after  due 
notice  has  been  given,  to  make  such  list,  according 
to  the  best  information  he  can  obtain  by  the  exam- 
ination of  such  person,  or  any  other  evidence. 

When  duly  certified  by  the  assessor,  the  said 
list  thus  prepared  shall  be  the  return  of  said  person 
and  the  tax  so  ascertained  to  be  due,  shall  be  double 
the  original  rate. 

Art.  19.  The  annual  return  must  be  verified 
by  oath  or  affirmation  of  the  person  making  the  same. 
Assessors  are  directed  by  law  to  require  every  return 
to  be  so  verified  by  the  person  rendering  it.  The 
affidavit  may  be  made  before  the  assessor  for  the 
county  or  township  or  before  any  officer  authorized 
by  law  to  administer  oaths. 

Art.  20.  When  the  return  is  not  filed  within 
the  required  time  by  reason  of  sickness  or  absence 
of  the  individual,  an  extension  of  time,  not  exceeding 
30  days  from  March  1,  within  which  to  file  such  return 
may  be  granted  by  the  assessor,  provided  a written 
application  therefor  is  made  by  the  individual  within 
the  period  for  which  such  extension  is  desired. 

Art.  21.  All  assessments  shall  be  made  by  the 
assessor,  and  all  persons  shall  be  notified  of  the 
amount  for  which  they  are  respectively  liable  on  or  be- 
fore the  1st  day  of  June  of  each  successive  year, 
and  said  assessments  shall  be  paid  on  or  before  the  1st 
day  of  June,  except  in  cases  of  refusal  or  neglect 
to  make  such  return  and  in  cases  of  false  or  fraudu- 
lent returns,  in  which  cases  the  assessor  shall,  upon 
the  discovery  thereof,  at  any  time  within  three  years 
after  said  return  is  due,  make  a return  upon  in- 
formation obtained,  as  provided  by  the  law,  and  the 
assessment  made  by  the  assessor  thereon  shall  be 
paid  by  such  person  or  persons  immediately  upon 
notification  of  the  amount  of  such  assessment. 

Art.  22.  If  any  person,  corporation,  joint-stock 
company,  association,  or  insurance  company  liable 
to  make  returns  or  pay  tax  shall  refuse  or  neglect  to 
make  returns  at  the  time  or  times  specified  in  each 
year,  such  person  shall  be  liable  to  a penalty  of  not 
less  than  $100  nor  more  than  $5,000. 


Refusal  or 
neglect  to  make 
return. 


Penalty  for 
failure  to  make 
return  o r for 
making  false  re- 
turn. 


Returns  to 
be  verified  by 
oath  or  affirma- 
tion. 


Extension  of 
time  to  file  re- 
turn may  be 
granted. 


Assessments; 
notification  of ; 
when  to  be 
paid. 


Penalties  for 
failure  to  make 
returns. 


26 


INCOME  TAX  REGULATIONS. 


Penalties  for 
making  false  or 
fraudulent  re- 
turns. 


Organiza- 
tions subject  to 
tax. 


Rate  explain- 
ed? calendar 
year  1921. 


Fiscal  year 
rate. 


Rate  on  in- 
comes of  year 
1922. 


Any  person  or  any  officer  of  any  corporation 
required  by  law  to  make,  render,  sign,  or  verify 
any  return  who  makes  any  false  or  fraudulent  return 
or  statement  with  intent  to  defeat  or  evade  the 
assessment  required  by  law  to  be  made  shall  be 
guilty  of  a misdemeanor,  and  shall  be  fined  not 
exceeding  $500.00  or  be  imprisoned  not  exceeding  one 
year,  or  both,  at  the  discretion  of  the  court,  with 
the  costs  of  prosecution. 

Art.  23.  Nothing  in  the  law  or  these  regula-  • 
tions  shall  be  construed  to  release  a taxable  person 
from  liability  for  income  tax,  nor  shall  any  contract 
entered  into  after  the  act  of  April  12,  1917,  took 
effect  be  valid  in  regard  to  any  State  income  tax 
imposed  upon  a person  liable  to  such  payment. 


PART  2. 

Relating  to  the  income  tax  imposed  by  Revised 
Statutes  1919  as  amended  August  1,  1921, 
on  Corporations,  Joint-stock  Companies  or  Asso- 
ciations, and  Insurance  Companies. 

Art.  24.  Under  the  provisions  of  section  13112 
of  the  income  tax  law,  every  corporation,  joint-stock 
company  or  association,  and  every  insurance  com- 
pany organized  in  the  State  of  Missouri,  no  matter 
how  created  or  organized,  except  those  specifically 
exempted,  shall  be  subject  to  pay  annually  an  in- 
come tax  upon  the  entire  net  income  arising  or  ac- 
cruing from  all  sources  during  the  preceding  cal- 
endar or  fiscal  year,  as  the  case  may  be. 

The  rate  of  tax  for  the  calendar  year  1921  is 
computed  as  follows:  For  the  first  ten  months  it 
is  at  the  rate  of  one  and  one-half  per  cent.  For  the 
last  two  months  it  is  at  the  rate  of  one-half  of  one 
per  cent.  This  calculation  makes  the  rate  for  the 
entire  year  one  and  one-third  per  cent. 

Corporations  making  returns  on  the  basis  of  a 
fiscal  year  will  be  required  to  compute  their  tax  at 
the  rate  of  one  and  one-half  per  cent  up  to  Novem- 
ber 1st,  1921,  and  if  the  fiscal  year  ends  November 
30th,  at  the  rate  of  one-half  of  one  per  cent  for-  the 
one  month. 

Commencing  with  the  year  1922  and  subse- 
quent years,  the  rate  on  incomes  shall  be  at  the  rate 
of  one  per  cent.  Individuals  and  corporations  are 
to  bear  this  instruction  in  mind  when  making  their 
returns  in  1923. 


INCOME  TAX  REGULATIONS. 


27 


Art.  25.  A similar  tax  shall  be  levied,  assessed 
against,  and  paid  annually  by  corporations,  joint- 
stock  companies  or  associations,  and  insurance 
companies  organized,  authorized,  or  existing  under 
the  laws  of  any  foreign  country  upon  the  amount  of 
net  income  accruing  from  business  transacted  and 
capital  invested  within  the  State  of  Missouri  during 
such  year. 

Art.  26.  “Corporation”  or  “corporations,”  as 
used  in  these  regulations,  shall  be  construed  to  in- 
clude all  corporations,  joint-stock  companies  or 
associations,  and  all  insurance  companies  coming 
within  the  terms  of  the  law,  and  such  organizations 
will  hereinafter  be  referred  to  as  “corporations.” 

Art.  27.  It  is  immaterial  how  such  corpora- 
tions are  created  or  organized.  The  terms  “joint- 
stock  companies”  or  “associations”  shall  include 
associates,  real  estate  trusts,  or  by  whatever  name 
known,  which  carry  on  or  do  business  in  an  organized 
capacity,  whether  organized  under  and  pursuant  to 
State  laws,  trust  agreements,  declarations  of  trusts, 
or  otherwise,  the  net  income  of  which,  if  any,  is 
distributed,  or  distributable,  among  the  members  or 
share  owners  on  the  basis  of  the  capital  stock  which 
each  holds,  or,  where  there  is  no  capital  stock,  on 
the  basis  of  the  proportionate  share  of  capital  which 
each  has  invested  in  the  business  or  property  of  the 
organization,  all  of  which  joint-stock  companies  or 
associations  shall,  in  their  organized  capacity,  be 
subject  to  the  tax  imposed  by  this  act. 

Art.  28.  Every  corporation  not  specifically 
enumerated  as  exempt  shall  make  the  return  of 
annual  net  income  required  by  law  whether  or  not 
it  may  have  any  income  liable  to  tax,  or  whether  or 
not  it  shall  be  subordinate  to  or  controlled  by 
another  corporation.  Mutual  telephone  companies, 
mutual  insurance  companies,  and  like  organizations, 
although  local  in  character,  and  whose  income 
consists  largely  from  assessments,  dues,  and  fees 
paid  by  members,  do  not  come  within  the  class  of 
corporations  specifically  enumerated  as  exempt. 
Their  status  under  the  law  is  not  dependent  upon 
whether  they  are  or  are  not  organized  for  profit. 
Not  coming  within  the  statutory  exemption,  all 
organizations  of  this  character  will  be  required  to 
make  returns  of  annual  net  income,  and  pay  any 
income  tax  thereby  shown  to  be  due.  For  this 
purpose  the  surplus  of  receipts  of  the  year  over 


Foreign  cor- 
porations sub- 
ject to  the  tax. 


Corporations 

defined. 


Associations, 
real  estate 
trusts,  etc.,  sub- 
ject to  tax. 


Corporations 
required  to 
make  returns. 


Mutual  tele- 
phone and  mu- 
tual insurance 
companies  not 
exempt. 


28 


INCOME  TAX  REGULATIONS. 


Interest  de- 
duction by  cor- 
porations oper- 
ating leased  or 
purchased  lines. 


Lessee  cor- 
porations not  to 
include  capital 
stock  or  indebt- 
edness of  lessor 
corporations. 


Foreign  cor- 
porations hav- 
ing branch  of- 
fices in  the  State 
of  Missouri  to 
designate  prin- 
cipal office. 


Corporations 
organized  dur 
ing  year  to 
make  returns. 


Corporations 
going  into  liqui- 
dation. 


expenses  will  constitute  the  net  income  upon  which 
the  tax  will  be  assessed. 

A railroad  or  other  corporation  which  has  leased 
its  properties  in  consideration  of  a rental  equivalent 
to  a certain  rate  of  dividends  on  its  outstanding 
capital  stock  and  the  interest  on  the  bonded  indebt- 
edness, and  such  rental  is  paid  by  the  lessee  directly 
to  the  stock  and  bondholders,  should,  nevertheless, 
make  a return  of  annual  net  income  showing  the 
rental  so  paid  as  having  been  received  by  the  cor- 
poration. 

Art.  29.  A railroad  company  operating  leased 
or  purchased  lines  shall  include  all  receipts  derived 
therefrom,  and,  if  bonded  indebtedness  of  such 
lines  has  been  assumed,  such  operating  company 
may  deduct  the  interest  paid  thereon  to  an  amount 
not  exceeding  one-half  of  the  sum  of  its  interest- 
bearing  indebtedness  and  its  paid-up  capital  stock 
outstanding  at  the  close  of  the  year. 

Art.  30.  Corporations  operating  leased  lines 
should  not  include  the  capital  stock  of  the  lessor 
corporations  in  their  own  statement  of  capital  stock 
outstanding  at  the  close  of  the  year.  The  indebted- 
ness of  such  lessor  corporations  should  not  be  in- 
cluded in  the  statement  of  the  indebtedness  of  the 
lessee  unless  the  lessee  has  assumed  the  same.  Each 
leased  or  subsidiary  company  will  make  its  own 
separate  return,  accounting  for  therein  all  income 
which  it  may  have  received  by  way  of  dividends, 
rentals,  interest,  or  from  any  other  source. 

Art.  31.  A foreign  corporation  having  several 
branch  offices  in  the  State  of  Missouri  should  desig- 
nate one  of  such  branches  as  its  principal  office  and 
should  also  designate  the  proper  officers  to  make  the 
required  return. 

Art.  32.  A corporation  organized  during  the 
year  should  render  a sworn  return  on  the  prescribed 
form,  covering  that  portion  of  the  year  (calendar  or 
fiscal)  during  which  it  was  engaged  in  business  or 
had  an  income  accruing  to  it. 

Art.  33.  Corporations  going  into  liquidation 
during  any  tax  period  may,  at  the  time  of  such 
liquidation,  prepare  a “final  return”  covering  the 
income  received  or  accrued  to  them  during  the 
fractional  part  of  the  year  during  which  they  were 
engaged  in  business,  and  immediately  file  the  same 
with  the  assessor  of  the  county  or  township  in  which 
the  corporations  have  their  principal  places  of  busi- 
ness. 


INCOME  TAX  REGULATIONS. 


29 


Art.  34.  Limited  partnerships  are  held  to  be 
corporations  within  the  meaning  of  this  act  and  these 
regulations,  and  in  their  organized  capacity  are  sub- 
ject to  the  income  tax  as  corporations. 

Art.  35.  The  act  specifically  enumerates  and 
exempts  from  its  provisions  and  requirements  labor, 
agricultural,  or  horticultural  organizations,  mutual 
savings  banks  not  having  a capital  stock  represented 
by  shares,  fraternal  beneficiary  societies,  orders,  or 
associations  operating  under  the  lodge  system,  or  for 
the  exclusive  benefit  of  the  members  of  a fraternity 
itself  operating  under  the  lodge  system,  and  providing 
for  the  payment  of  life,  sick,  accident,  and  other 
benefits  to  the  members  of  such  societies,  orders, 
or  associations,  and  dependents  of  such  members, 
domestic  building  and  loan  associations,  cemetery 
companies  organized  and  operated  exclusively  for 
the  mutual  benefit  of  their  members,  any  and  all 
corporations  or  associations  organized  and  operated 
exclusively  for  religious,  charitable,  scientific,  or 
educational  purposes,  no  part  of  whose  net  income 
inures  to  the  benefit  of  any  private  stockholder  or 
individual,  business  leagues,  chambers  of  commerce, 
or  boards  of  trade  not  organized  for  profit,  no  part 
of  the  net  income  of  which  inures  to  the  benefit 
of  the  private  stockholder  or  individual,  and  civic 
leagues  or  similar  organizations  not  organized  for 
profit,  but  operated  exclusively  for  the  promotion 
of  social  welfare. 

Domestic  building  and  loan  associations  are 
among  those  enumerated  as  exempt  from  the  re- 
quirements of  the  law.  A domestic  building  and 
loan  association  is  held  to  be  one  organized  under 
and  pursuant  to  the  laws  of  the  State  of  Missouri, 
or  under  the  laws  applicable  to  Alaska  or  the  Dis- 
trict of  Columbia.  Mutuality  in  operation  and  in 
the  distribution  of  profits  and  benefits  is  essential 
to  exemption.  Therefore,  in  order  to  come  within 
the  exempted  class  such  associations  must  not  only 
be  “Domestic,”  as  defined,  but  they  must  be  organ- 
ized and  operated  exclusively  for  the  mutual  benefit 
of  the  members;  that  is,  all  the  profits  and  benefits 
provided  for  in  the  articles  of  association  and  by- 
laws must  be  ratably  distributed  among  all  members 
regardless  of  the  kind  of  stock  held,  according  to 
the  amount  of  money  they  have  on  deposit.  An 
association  issuing  different  classes  of  stock  upon 
which  different  rates  of  interest  or  dividends  are 
guaranteed  or  paid,  does  not  come  within  the 
exempted  class. 


Limited  part- 
nerships. 


Corporations 
exempt  from 
tax. 


Domestic 
building  and 
loan  associa- 
tions defined. 
Mutuality  es- 
sential. 


30 


INCOME  TAX  REGULATIONS. 


Corporations 
must  establish 
their  right  t o 
exemption. 


Society  or  as- 
sociation sub- 
ject to  exemp- 
tion defined. 


Cemetery 
companies  or- 
ganized for  mu- 
tual benefit  of 
their  members 
exempt. 


Corporations 
whose  status  as 
to  exemption  is 
in  doubt  must 
make  return. 


Co-operative 
dairies  not 
issuing  stock 
and  allowing 
patrons  d i v i - 
dends,  exempt. 


When  income 
from  public 
utilities  is  not 
taxable. 


Art.  36.  All  corporations  and  all  beneficiary 
societies  enumerated  above  shall  by  affidavit,  or 
otherwise,  at  the  request  of  the  assessor  or  State 
Auditor,  establish  their  right  to  the  exemption  pro- 
vided, in  which  case  it  will  not  be  sufficient  to  merely 
declare  that  they  are  exempt,  but  they  must  show 
the  character  and  purpose  of  the  organization,  the 
manner  of  distributing  the  net  income,  if  any,  or 
that  none  of  the  net  income  inures  to  the  benefit 
of  any  private  stockholder  or  individual.  In  the 
absence  of  such  a showing,  such  organizations  may, 
at  any  time,  be  required  to  make  returns  of  annual 
net  income  or  disclose  their  books  of  account  to  a 
revenue  officer  for  examination  in  order  that  the 
status  of  the  company  may  be  determined. 

Art.  37.  A society  or  association  “operating 
under  the  lodge  system”  is  considered  to  be  one 
organized  under  a charter,  with  properly  appointed  or 
elected  officers,  with  an  adopted  ritual  or  ceremonial, 
holding  meetings  at  stated  intervals,  and  supported 
by  fees,  dues,  or  assessments. 

Art.  38.  Cemetery  companies  organized  and 
operated  exclusively  for  the  mutual  benefit  or  their 
members  are  exempt.  The  provisions  of  the  law 
clearly  indicate  that  companies  which  operate  ceme- 
teries for  profit  are  liable  to  the  tax.  The  status 
of  cemetery  associations  under  the  law  will,  there- 
fore, depend  upon  the  character  and  purpose  of  the 
organization  and  what  disposition  is  made  of  the 
income. 

Art.  39.  Any  corporation,  concerning  whose 
status  under  the  law  there  is  any  doubt,  or  which 
does  not  clearly  come  within  one  or  another  of  the 
classes  of  those  specifically  enumerated  as  exempt, 
should  file  a return  (in  blank  if  desired)  and  attach 
thereto  a statement  setting  out  fully  the  nature  and 
purpose  of  the  organization,  the  source  of  its  income, 
and  what  disposition  is  made  of  it,  and  particularly 
of  any  surplus. 

Art.  40.  Co-operative  dairies  not  issuing  stock 
and  allowing  patrons  dividends  based  on  butter  fat 
in  milk  furnished  are  not  liable.  In  such  case  the 
“dividends”  are  the  purchase  price  of  the  raw  ma- 
terial furnished. 

Art.  41.  The  income  derived  from  any  public 
utility  or  from  the  exercise  of  any  essential  govern- 
mental function,  which  income  accrues  to  any  State, 
Territory,  the  District  of  Columbia,  or  any  political 
subdivision  of  a State,  Territory,  or  the  District  of 


INCOME  TAX  REGULATIONS. 


31 


Columbia  shall  not  be  subject  to  the  tax  imposed  by 
this  act.  In  cases  wherein  any  State,  Territory, 
or  the  District  of  Columbia,  or  any  political  sub- 
division of  a State,  or  Territory,  shall  have,  prior 
to  the  passage  of  this  act,  contracted  in  good  faith 
with  any  person  or  corporation  to  acquire,  construct, 
operate,  or  maintain  a public  utility,  no  income  tax 
pursuant  to  this  act  shall  be  levied  upon  the  income 
derived  from  the  operation  of  such  public  utility, 
so  far  as  the  assessment  and  payment  of  such  tax 
will  impose  a loss  or  burden  upon  such  State,  Terri- 
tory, District  of  Columbia,  or  political  subdivision. 
But  the  person  or  corporation  is  not  relieved  from 
the  payment  of  the  tax  upon  that  portion  of  the  in- 
come accruing  to  him,  or  it,  under  such  contract. 

Art.  42.  Ordinary  copartnerships  are  not,  as 
such,  subject  to  the  tax  imposed  by  this  act,  but 
the  individual  members  of  any  such  partnership  are 
liable  for  income  tax  only  in  their  individual  capacity 
on  their  respective  shares  of  the  earnings  of  such 
partnership,  whether  such  earnings  be  distributed  or 
not. 

Art.  43.  Full  amount  of  stock,  as  represented 
by  the  par  value  of  the  shares  issued,  is  to  be  re- 
garded as  the  paid-up  capital  stock,  except  when 
such  stock  is  assessable  on  account  of  deferred  pay- 
ments, or  payable  in  installments,  in  which  case  the 
amount  actually  paid  on  such  shares  will  constitute 
the  actual  paid-up  capital  stock  of  the  corporation. 

Art.  44.  The  following  definitions  and  rules 
are  given  for  determining  the  gross  income  of  various 
classes  of  corporations: 

Gross  income  of  banks  and  other  financial  insti- 
tutions consists  of  the  total  revenue  derived  from 
the  operation  of  the  business,  including  income, 
gains,  or  profits  from  all  other  sources,  as  shown 
by  the  entries  on  the  books  of  account,  within  the 
calendar  or  fiscal  year  for  which  the  return  is  made. 

Art.  45.  Gross  income  of  insurance  companies 
consists  of  the  total  revenue  derived  from  the  opera- 
tion of  the  business,  including  income,  gains,  or 
profits  from  all  other  sources,  as  shown  by  the 
entries  on  the  books  of  account  within  the  calendar 
or  fiscal  year  for  which  the  return  is  made,  except 
as  modified  by  the  express  exemptions  of  the  article 
which  apply  to  mutual  fire,  mutual  marine,  and  life 
insurance  companies. 

Art.  46.  Mutual  fire  insurance  companies, 
which  require  their  members  to  make  premium 


Persons  or 
corporations 
not  exempt. 


Partnerships 
not  taxable  as 
corporations. 


What  consti- 
tutes paid  - up 
capital  stock. 


Gross  in- 
come, how  de- 
termined. 


Gross  income 
of  banks  and 
other  financial 
institutions. 


Gross  income 
of  insurance 
companies. 


Gross  income 
of  mutual  fire 
insurance  com- 
panies. 


32 


INCOME  TAX  REGULATIONS. 


Mutual  ma- 
rine insurance 
companies. 


Deferred  div- 
idends deduct- 
ible, when. 


Gross  income 
of  insurance 
companies,  t o 
include  what. 


Consideration 
for  supplemen- 
tary contracts. 


deposits  to  provide  for  losses  and  expenses,  shall 
not  return  as  gross  income  any  portion  of  the  pre- 
mium deposits  returned  to  their  policyholders,  but 
shall  return  as  taxable  income  all  income  received 
by  them  from  all  other  sources  plus  such  portions  of 
the  premium  deposits  as  are  retained  by  the  com- 
panies for  purposes  other  than  the  payment  of  losses 
and  expenses  and  reinsurance  reserves. 

Art.  47.  Mutual  marine  insurance  companies 
may  include  in  their  deductions  from  gross  income 
amounts  repaid  to  policyholders  on  account  of  pre- 
miums previously  paid  by  them  and  interest  paid 
upon  such  amounts  between  the  ascertainment 
thereof  and  the  payment  thereof,  such  amounts  and 
interest  having  been  included  in  gross  income. 

Art.  48.  Life  insurance  companies  are  author- 
ized to  omit  from  gross  income  such  portion  of  any 
actual  premium  received  from  any  individual  policy- 
holder as  shall  have  been  paid  back  or  credited  to 
the  policyholder  or  treated  as  an  abatement  of  his 
premium.  In  so  far  as  “deferred  dividends”  payable 
at  a stated  period  represent  “a  portion  of  any  actual 
premium  received,”  such  deferred  dividends  may  be 
included  in  the  amounts  to  be  omitted  from  gross 
income  for  the  year  in  which  they  were  actually 
paid  back,  credited  to  the  policyholder,  or  applied 
as  an  abatement  of  premium.  In  the  case  of  divi- 
dends credited  or  apportioned  annually  to  the  policy- 
holder, only  the  aggregate  amount  so  actually  cred- 
ited or  apportioned  during  the  premium-paying 
period,  and  not  any  accretions  thereto,  can  be  ex- 
cluded from  gross  income.  In  the  case  of  whole- 
life  or  five-year  distribution  policies,  deferred  divi- 
dends may  be  excluded  from  gross  income  to  the 
extent  that  they  are  paid  back,  or  credited  to  the 
insured,  or  used  as  an  abatement  of  his  annual 
premiums. 

Art.  49.  Gross  income  of  insurance  companies, 
as  defined  above,  will  include  net  premium  income 
as  reported  to  the  State  insurance  department,  except 
the  foregoing  items  specifically  exempted  in  the  act, 
and,  in  the  case  of  life  insurance  companies,  surrender 
values  applied  in  any  manner,  consideration  for  sup- 
plementary contracts  involving  and  not  involving 
life  contingencies,  and  all  other  income,  gains,  or 
profit  as  shown  by  the  books  of  account. 

Art.  50.  Applied  surrender  values  and  consid- 
eration for  supplementary  contracts  not  involving 
life  contingencies  included  in  income  will,  of  course. 


INCOME  TAX  REGULATIONS. 


33 


be  deducted  as  payments  under  policy  contracts, 
but  for  convenience  in  verifying  the  returns,  these 
items  should  appear  in  the  return  in  both  gross 
income  and  deductions. 

Art.  51.  All  insurance  companies  should  include 
and  attach  to  their  returns  a supplementary  state- 
ment showing,  for  life  companies,  the  aggregate  of 
items  “of  such  portion  of  any  actual  premium  re- 
ceived from  any  individual  policyholder  as  shall  have 
been  paid  back  or  credited  to  such  individual  policy- 
holder, or  treated  as  an  abatement  of  premium  of 
such  individual  policyholder  within  such  year;”  in 
the  case  of  mutual  fire  insurance  companies  a state- 
ment showing  “any  portion  of  the  premium  deposits 
returned  to  their  policyholders;”  and  in  the  case 
of  mutual  marine  companies  “amounts  repaid  to 
policyholders  on  account  of  premiums  previously 
paid  by  them,  and  interest  paid  upon  such  amounts 
between  the  ascertainment  thereof  and  the  payment 
thereof,”  which  are,  or  may  be,  omitted  from  gross 
income. 

Art.  52.  Gross  income  of  manufacturing  com- 
panies shall  consist  of  the  total  sales  of  manufactured 
goods  during  the  year  covered  by  the  return,  in- 
creased or  decreased  by  the  gain  or  loss  as  shown 
by  the  inventories  of  finished  and  unfinished  prod- 
ucts, raw  material,  etc.,  at  the  beginning  and  end 
of  the  year.  To  this  amount  should  be  added  the 
income,  gains,  or  profits  from  all  other  sources  as 
shown  by  the  books  of  account. 

Art.  53.  Gross  income  of  mercantile  companies 
shall  include  the  total  merchandise  sales  during  the 
year,  increased  or  decreased  by  the  gain  or  loss  as 
shown  by  the  inventories  of  merchandise  at  the 
beginning  and  end  of  the  year  for  which  the  return 
is  made;  to  this  amount  should  be  added  the  income, 
gains,  or  profits  derived  from  all  other  sources  as 
shown  by  the  books  of  account. 

Art.  54.  Gross  income  of  miscellaneous  cor- 
porations consists  of  the  total  revenue  derived  from 
the  operation  and  management  of  the  business  and 
property  of  the  corporation  making  the  return, 
together  with  all  amounts  of  income,  including  the 
income,  gains,  or  profits  from  all  other  sources  as 
shown  by  the  books  of  account. 

Art.  55.  It  will  be  noted  from  these  definitions 
that  the  gross  income  embraces  not  only  the  operat- 
ing revenues,  but  also  income,  gains  or  profits  from 


Supplemen- 
tary statement 
to  accompany 
returns. 


Gross  income 
of  manufactur- 
ing companies. 


Gross  income 
o f mercantile 
corporations. 


Gross  income 
o f miscellane- 
ous companies. 


Definition  of 
gross  ncome. 


34 


INCOME  TAX  REGULATIONS. 


Income  de- 
rived from  sale 
of  capital  as- 
sets. 


Ascertaining 
net  income 
from  the  sale 
of  capital  as- 
sets. 


Profit  or  loss 
arising  from  the 
sale  of  such  as- 
sets. 


Changes  i n 
book  value  of 
assets. 


Result  of  an- 
nual adjust- 
ment of  values 
to  be  shown  in 
return. 


all  other  sources,  such  as  rentals,  royalties,  interest, 
and  dividends  from  stock  owned  in  other  corpora- 
tions, and  appreciation  in  values  of  assets,  if  taken 
up  on  the  books  of  account  as  gain;  also  profits 
made  from  the  sale  of  assets,  investments,  etc. 

Art.  56.  For  the  purpose  of  determining  the 
income  resulting  from  the  sale  of  capital  assets  and 
the  amount  to  be  accounted  for  as  income  under 
this  act,  there  shall  be  included  any  and  all  profit 
resulting  from  such  sale  and  which  may  be  appor- 
tioned to  the  period  during  which  the  corporation 
tax  law  (April  12,  1917)  was  in  force  and  effect, 
which  was  not  returned  as  income  during  that  period. 

Art.  57.  In  ascertaining  net  income  derived 
from  the  sale  of  capital  assets,  if  such  assets  were 
acquired  subsequent  to  January  1,  1918,  the  difference 
between  the  selling  price  and  the  buying  price  shall 
constitute  an  item  to  be  added  to  or  subtracted 
from  gross  income  according  to  whether  the  selling 
price  was  greater  or  less  than  the  buying  price.  If 
the  capital  assets  were  acquired  prior  to  January  1, 
1918,  the  amount  of  profit  or  loss  representing  the 
difference  between  the  market  value  as  of  January 
1,  1918,  and  price  for  which  they  were  sold  shall  be 
added  to,  or  deducted  from,  the  gross  income  for  the 
year  in  which  the  sale  was  made. 

Art.  58.  For  the  purpose  of  determining  the 
profit  or  loss  arising  from  the  sale  of  such  assets, 
there  shall  be  added  to  the  price  actually  realized 
from  the  sale  any  amount  which  has  heretofore 
been  set  aside  and  deducted  from  gross  income  by 
way  of  depreciation  since  January  1,  1918,  which  has 
not  been  paid  out  in  making  good  such  depreciation 
on  the  property  sold. 

Art.  59.  In  the  case  of  changes  in  book  values 
of  capital  assets  resulting  from  a reappraisal  of 
property,  the  consequent  gains  or  losses  shall  be 
computed  for  the  return  in  the  manner  prescribed 
above  in  the  case  of  the  sale  of  capital  assets. 

In  cases  wherein  there  is  an  annual  adjustment 
of  book  values  of  securities,  real  estate  and  like 
assets,  and  the  increases  and  decreases  in  values, 
thus  indicated,  are  taken  up  on  the  books  and  re- 
flected in  the  profit  and  loss  account,  such  readjusted 
values  will  be  taken  into  account  in  making  the 
return  of  annual  net  income  and  no  prorating  will 
be  required.  If  such  adjustment  had  been  made 
annually  prior  to  January  1,  1918,  the  book  value  of 
the  assets  at  that  date  will  be  taken  as  the  basis 


INCOME  TAX  REGULATIONS. 


35 


for  determining  gain  or  loss  resulting  from  subse- 
quent sale,  maturity,  or  adjustment.  The  adjust- 
ment referred  to  will  comprehend  assets  which  have 
increased  in  value  as  well  as  those  which  have  de- 
creased. 

Art.  60.  Where  a corporation  is  engaged  in 
carrying  on  more  than  one  class  of  business,  gross 
income  derived  from  the  different  classes  of  business 
shall  be  ascertained  according  to  the  definitions 
above,  and  which  are  applicable  thereto. 

Art.  61.  The  net  income  shall  be  ascertained 
by  deducting  from  the  gross  amount  of  the  income 
of  such  corporation  received  within  the  year  from 
all  sources: 

First.  All  the  ordinary  and  necessary  expenses 
paid  within  the  year  in  the  maintenance  and  opera- 
tion of  its  business  and  properties,  including  rentals 
or  other  payments  required  to  be  made  as  a condition 
to  the  continued  use  or  possession  of  property. 

Second.  All  losses  actually  sustained  within  the 
year  and  not  compensated  by  insurance  or  otherwise, 
including  a reasonable  allowance  for  depreciation  by 
use,  wear  and  tear  of  property,  if  any,  and  in  the 
case  of  mines,  a reasonable  allowance  for  depletion 
of  ores  and  all  natural  deposits,  of  the  gross  value 
at  the  mine  of  the  output  for  the  year  for  which 
the  computation  is  made;  and  in  the  case  of  insur- 
ance companies,  the  net  addition,  if  any,  required 
by  law  to  be  made  within  the  year  to  reserve  funds, 
and  the  sums  other  than  dividends  paid  within  the 
year  on  policy  and  annuity  contracts,  except  as 
provided  in  the  cases  of  mutual  fire,  mutual  marine, 
and  life  insurance  companies. 

Third.  The  amount  of  interest  accrued  and 
paid  within  the  year  on  its  indebtedness  to  an  amount 
of  such  indebtedness  not  exceeding  one-half  of  the 
sum  of  its  interest-bearing  indebtedness  and  its 
paid-up  capital  stock  outstanding  at  the  close  of 
the  year,  or  if  no  capital  stock,  on  the  amount  of 
its  indebtedness  not  exceeding  the  amount  of  capital 
employed  in  the  business  at  the  close  of  the  year: 
Provided , that  in  case  of  indebtedness  wholly  secured 
by  collateral  the  subject  of  sale  in  ordinary  business 
of  such  corporation,  joint-stock  company,  or  associa- 
tion, the  total  interest  secured  and  paid  by  such 
company,  corporation,  or  association  within  the  year 
on  any  such  indebtedness  may  be  deducted  as  a part 
of  its  expense  of  doing  business:  Provided  further , 
that  in  the  case  of  bonds  or  other  indebtedness, 
which  have  been  issued  with  a guaranty  that  the 


Where  cor- 
porations are 
engaged  in 
more  than  one 
class  o f busi- 
ness. 


Net  income, 
how  ascer- 
tained. 


Ordinary  and 
necessary  e x - 
penses. 


Loss  sus- 
tained within 
the  year. 


Depreciation. 


Interest  ac- 
crued and  paid 
within  the  year. 


Interest  on 
indebtedness 
secured  by  col- 
lateral. 


Tax  paid  on 
guaranteed 
bonds  not  de- 
ductible. 


36 


INCOME  TAX  REGULATIONS. 


Taxes  paid 
within  the  year. 


General  ex- 
penses, 


Cost  of  build- 
ings on  leased 
grounds. 


Commissions 
to  salesmen 
paid  in  stock. 


Additions  and 
betterments. 


Compensa- 
tion based  on 
stockholding 
not  deductible. 


Gifts,  pen- 
sions, or  gratui- 
ties not  deduct- 
ible. 


Donations 
which  are  de- 
ductible. 


interest  payable  thereon  shall  be  free  from  taxation, 
no  deduction  for  the  payment  of  the  tax  herein 
imposed  shall  be  allowed;  and  in  the  case  of  a bank, 
banking  association,  loan,  or  trust  company,  interest 
paid  within  the  year  on  deposits  or  on  moneys 
received  for  investment  and  secured  by  interest- 
bearing  certificates  of  indebtedness  issued  by  such 
bank,  banking  association,  loan,  or  trust  company. 

Fourth.  All  sums  paid  within  the  year  for  taxes 
imposed  under  the  authority  of  the  United  States, 
or  any  state  or  territory  thereof,  or  imposed  by  the 
government  of  any  foreign  country. 

Art.  62.  Expenses  of  operation  and  mainte- 
nance shall  include  all  expenditures  for  material,  labor, 
fuel,  and  other  items  entering  into  the  cost  of  the 
goods  sold  or  inventoried  at  the  end  of  the  year, 
and  all  other  expenses  incurred  in  the  operation  of 
the  business  except  such  as  are  required  by  the  act 
to  be  segregated  in  the  return. 

Art.  63.  The  cost  of  erecting  permanent  build- 
ings on  ground  leased  by  a company  is  a proper 
deduction  as  a rental  charge,  provided  such  build- 
ings are  left  on  the  ground  at  the  expiration  of  the 
lease  as  a part  of  the  rental  payment.  In  such 
case  the  cost  will  be  prorated  according  to  the 
number  of  years  constituting  the  term  of  the  lease 
and  the  annual  deduction  will  be  made  accordingly. 

Art.  64.  Commissions  allowed  salesmen,  paid 
in  stock,  may  be  deducted  as  expense  if  so  charged 
on  books  at  the  actual  value  of  such  stock. 

Art.  65.  Amounts  expended  in  additions  and 
betterments  which  constitute  an  increase  in  capital 
investment  are  not  a proper  deduction. 

Art.  66.  Amounts  paid  as  compensation  or 
additional  compensation  to  officers  or  employees, 
which  amounts  are  based  upon  the  stockholdings 
of  such  officers  or  employees,  are  held  to  be  dividends, 
and  although  paid  in  lieu  of  salaries  or  wages,  are 
not  allowable  deductions  from  gross  income,  for  the 
reason  that  dividends  are  not  deductible. 

Art.  67.  Amounts  paid  for  pensions  to  retired 
employees,  or  to  their  families,  or  others  dependent 
upon  them,  or  on  account  of  injuries  received  by 
employees,  are  proper  deductions  as  “ordinary  and 
necessary  expenses;”  gifts  or  gratuities  to  employees 
in  the  service  of  a corporation  are  not  properly 
deductible  in  ascertaining  net  income. 

Art.  68.  Donations  made  for  purposes  con- 
nected with  the  operation  of  the  property  when 


INCOME  TAX  REGULATIONS. 


37 


limited  to  charitable  institutions,  hospitals,  or  edu- 
cational institutions,  conducted  for  the  benefit  of 
its  employees,  or  their  dependents,  shall  be  a proper 
deduction  for  ordinary  and  necessary  expenses. 

Art.  69.  Funds  set  aside  by  a corporation  for 
insuring  its  own  property  are  not  a proper  deduc- 
tion, but  any  loss  actually  sustained  and  charged 
to  such  fund  may  be  deducted. 

Art.  70.  In  ascertaining  expenses  proper  to  be 
included  in  the  deductions  to  be  made  under  the 
item  of  “Expenses,”  corporations  carrying  materials 
and  supplies  on  hand  for  use  should  include  in  such 
expenses  the  charges  for  materials  and  supplies  only 
to  the  amount  that  the  same  are  actually  disbursed 
and  used  in  operation  and  maintenance  during  the 
year  for  which  the  return  is  made. 

Art.  71.  The  deduction  for  losses  must  be  losses 
actually  sustained  during  the  year  and  not  compen- 
sated by  insurance  or  otherwise.  It  must  be  based 
upon  the  difference  between  the  cost  value  and  sal- 
vage value  of  property  or  assets,  including  in  the 
latter  value  such  amount,  if  any,  as  has,  in  the  current 
or  previous  years,  been  set  aside  and  deducted  from 
gross  income  by  way  of  depreciation,  as  elsewhere 
defined,  and  has  not  been  paid  out  in  making  good 
such  depreciation. 

Art.  72.  Bad  debts,  if  so  charged  off  the  com- 
pany’s books,  during  the  year,  are  proper  deduc- 
tions. But  such  debts,  if  subsequently  collected, 
must  be  treated  as  income. 

Art.  73.  Reserves  to  take  care  of  anticipated 
or  probable  losses  are  not  a proper  deduction  from 
gross  income. 

Art.  74.  Loss  due  to  voluntary  removal  of 
buildings,  etc.,  incident  to  improvements  is  either 
a proper  charge  to  the  cost  of  new  additions  or  to 
depreciation  already  provided,  as  the  facts  may 
indicate,  but  in  no  case  is  it  a proper  deduction  in 
determining  net  income,  except  as  it  may  be  re- 
flected in  the  reasonable  amount  allowable  as  a 
deduction  for  depreciation  of  the  new  building. 
Any  loss  claimed  because  of  the  voluntary  removal 
of  a building  is  presumed  to  have  been  covered  by 
previous  depreciation  charges;  otherwise  the  amount 
of  such  loss  will  constitute  a part  of  the  cost  of  the 
new  building. 

Art.  75.  All  losses  claimed  arising  from  sale  of 
capital  assets  should  be  arrived  at  in  the  manner 


Reserves  for 
insurance. 


Materials  and 
supplies. 


Losses  sus- 
tained during 
the  year. 


Bad  debts 
charged  off. 


Reserves  not 
deductible. 


Loss  due  to 
removal  of 
buildings. 


Losses  from 
sale  of  capital 
assets. 


38 


INCOME  TAX  REGULATIONS. 


Depreciation 

defined. 


Depreciation, 
how  deter- 
mined. 


Depreciation 
deductible, 
how  treated. 


Incidental  re- 
pairs. 


Depreciation 

reserve. 


Diversion  of 
depreciation  re- 
serve. 


prescribed  in  section  13114,  defining  gains  arising 
from  sale  of  capital  assets. 

Art.  76.  The  deduction  for  depreciation  should 
be  the  estimated  amount  of  the  loss,  accrued  during 
the  year  to  which  the  return  relates,  in  the  value  of 
the  property  in  respect  of  which  such  deduction  is 
claimed,  that  arises  from  exhaustion,  wear  and  tear, 
or  obsolescence  out  of  the  uses  to  which  the  property 
is  put,  and  which  loss  has  not  been  made  good  by 
payments  for  ordinary  maintenance  and  repairs  de- 
ducted under  the  heading  of  expenses  of  maintenance 
and  operation.  This  estimate  should  be  formed  upon 
the  assumed  life  of  the  property,  its  cost  and  its 
use.  Expenses  paid  in  any  one  year  in  making 
good  exhaustion,  wear  and  tear,  or  obsolescence  in 
respect  of  which  any  deduction  for  depreciation  is 
claimed,  must  not  be  included  in  the  deduction  for 
expense  of  maintenance  and  operation  of  the  prop- 
erty, but  must  be  made  out  of  accumulated  allow- 
ances, deducted  for  depreciation  in  current  and  pre- 
vious years. 

Art.  77.  The  depreciation  allowance,  to  be  de- 
ductible, must  be,  as  nearly  as  possible,  the  measure 
of  the  loss  due  to  wear  and  tear,  exhaustion,  and 
obsolescence,  and  should  be  so  entered  on  the  books 
as  to  constitute  a liability  against  the  assets  of  the 
company,  and  must  be  reflected  in  the  annual  balance 
sheet  of  the  company.  The  annual  allowance  de- 
ductible on  this  account  should  be  such  an  amount 
as  that  the  aggregate  of  the  annual  allowances  de- 
ducted during  the  life  of  the  property,  with  respect 
to  which  it  is  claimed,  will  not,  when  the  property 
is  worn  out,  exhausted,  or  obsolete,  exceed  its  original 
cost. 

Art.  78.  Incidental  repairs  which  neither  add 
to  the  value  of  the  property  nor  appreciably  prolong 
its  life,  but  keep  it  in  an  operating  condition,  may 
be  deducted  as  expenses. 

Art.  79.  Depreciation  set  up  on  the  books  and 
deducted  from  gross  income  can  not  be  used  for 
any  purpose  other  than  making  good  the  loss  sus- 
tained by  reason  of  the  wear  and  tear,  exhaustion, 
or  obsolescence  of  the  property  with  respect  to  which 
it  was  claimed.  If  it  develops  that  an  amount  has 
been  reserved  or  deducted  in  excess  of  the  loss  by 
depreciation,  the  excess  shall  be  restored  to  income 
and  so  accounted  for. 

Art.  80.  If  any  portion  of  the  depreciation  set 
up  is  diverted  to  any  purpose  other  than  making 


INCOME  TAX  REGULATIONS. 


39 


good  the  loss  sustained  by  reason  of  depreciation, 
the  income  account  for  the  year  in  which  such 
diversion  takes  place  must  be  correspondingly  in- 
creased. 

Art.  81.  Depreciation  in  book  values  of  capital 
assets  shall  be  treated  in  the  return  in  the  manner 
prescribed  in  the  case  of  loss  from  the  sale  of  capital 
assets  (Art.  75),  but  amounts  arbitrarily  charged 
off  will  not  be  allowed  as  deductions  except  so  far 
as  they  represent  an  actual  shrinkage  in  values 
which  may  be  determined  to  have  taken  place  during 
the  year  for  which  the  return  is  made. 

Art.  82.  Where  a corporation  holds  bonds  which 
were  purchased  at  a rate  above  par  and  said  cor- 
poration shall  proportionately  reduce  the  value  of 
those  bonds  on  its  books  each  year  so  that  the  book 
value  shall  be  the  redemption  value  of  the  bonds 
when  such  bonds  become  due  and  payable,  the  return 
of  annual  net  income  of  the  corporation  holding 
such  bonds  may  show  the  depreciation  on  account 
of  amortization  of  such  bonds.  The  requirement  is, 
however,  that  the  amount  carried  to  the  amortiza- 
tion account  each  year  shall  be  equitably  propor- 
tioned with  respect  to  the  difference  between  the 
purchase  price  and  the  maturing  value  and  the  num- 
ber of  years  to  elapse  until  the  bonds  become  due 
and  payable.  With  respect  to  bond  issues  where 
such  bonds  are  disposed  of  for  a price  less  than  par 
and  are  redeemable  at  par,  it  is  also  held  that 
because  of  the  fact  that  such  bonds  must  be  redeemed 
at  their  face  value,  the  loss  sustained  by  reason  of 
their  sale  for  less  than  their  face  value  may  be  pro- 
rated by  the  issuing  corporation  in  acordancce  with 
the  life  of  the  bond. 

Art.  83.  “Good  will”  represents  the  value  at- 
tached to  a business  over  and  above  the  value  of 
the  physical  property,  and  is  such  an  entirely  in- 
tangible asset  that  no  claim  for  depreciation  in 
connection  therewith  can  be  allowed. 

Art.  84.  An  allowance  for  depreciation  of 
patents  will  be  made  on  the  following  basis: 

The  deduction  claimed  for  exhaustion  of  the 
capital  assets  as  represented  by  patents  to  be  made 
in  the  return  of  annual  net  income  of  a corporation 
for  any  given  year  shall  be  one-seventeenth  of  the 
actual  cost  of  such  patents  reduced  to  a cash  basis. 
Where  the  patent  has  been  secured  from  the  Govern- 
ment by  a corporation  itself,  its  cost  would  be  repre- 
sented by  the  various  Government  fees,  cost  of 


Shrinkage  in 
book  value. 


Amortization 
of  bonds. 


Loss  to  be 
prorated. 


Good  will. 


Depreciation 
on  patents. 


How  deter- 
mined. 


40 


INCOME  TAX  REGULATIONS. 


Deduction  in 
case  of  obsoles- 
cence of  pat- 
ents. 


Depreciation 
of  timber  land. 


Deductions 
to  cease,  when. 


Depreciation 
of  natural  de- 
posits. 


drawings,  experimental  models,  attorneys’  fees,  etc. 
Where  the  patent  has  been  purchased  by  the  cor- 
poration for  a cash  consideration,  the  amount  would 
represent  the  cost.  Where  the  corporation  has  pur- 
chased a patent  and  made  payment  therefor  in 
stocks  or  other  securities,  the  actual  cash  value  of 
such  stocks  or  other  securities  at  the  time  of  the 
purchase  will  represent  the  cost  of  the  patent  to 
the  corporation. 

Art.  85.  With  respect  to  the  depreciation  of 
patents,  one-seventeenth  of  the  cost  is  allowable  as 
a proper  deduction  each  year  until  the  cost  of  the 
patent  has  been  returned  to  the  corporation.  Where 
the  value  of  a patent  has  disappeared  through  ob- 
solescence or  any  other  cause  and  the  fact  has  been 
established  that  the  patent  is  valueless,  the  unre- 
turned cash  investment  remaining  in  the  patent 
may  be  claimed  as  a total  loss  and  be  deducted 
from  gross  income  in  the  return  of  annual  net  income 
for  the  year  during  which  the  facts  as  to  obsolescence 
or  loss  shall  be  established,  such  unreturned  cash 
value  to  be  fixed  in  accordance  with  the  proportion 
that  the  number  of  years  which  the  patent  still 
has  to  run  bears  to  the  full  patent  period  of  17 
years. 

Art.  86.  Corporations  owning  tracts  of  timber 
lands  and  removing  therefrom  and  selling,  or  other- 
wise disposing  of  the  timber  will  be  permitted  to 
deduct  from  their  gross  income  on  account  of  de- 
preciation or  depletion  an  amount  representing  the 
original  cost  of  such  timber,  plus  any  carrying 
charges  that  may  have  been  capitalized  or  not  de- 
ducted from  income.  The  purpose  of  the  deprecia- 
tion or  depletion  deduction  is  to  secure  to  the  cor- 
poration, when  the  timber  has  been  exhausted,  an 
aggregate  amount  which,  plus  the  salvage  value  of 
the  land,  will  equal  the  capital  actually  invested 
in  such  timber  and  land. 

Art.  87.  When  an  amount  sufficient  to  return 
this  capital  has  been  secured  through  annual  de- 
preciation deductions  no  further  deduction  on  this 
account  shall  be  allowed.  For  the  purpose  of  in- 
creasing the  deduction  on  this  account  no  arbitrary 
increase  in  values  shall  be  made,  unless  such  increase 
in  value  shall  be  returned  as  income  for  the  year 
in  which  the  increase  in  value  was  taken  up  on  the 
books. 

Art.  88.  The  depreciation  of  coal,  iron,  oil, 
gas,  and  all  other  natural  deposits  must  be  based 
upon  the  actual  cost  of  the  properties  containing 


INCOME  TAX  REGULATIONS. 


41 


such  deposits.  In  no  case  shall  the  annual  deduction 
on  this  account  exceed  a reasonable  amount  of  the 
gross  value  at  the  mine  (well,  etc.)  of  the  output 
for  the  year  for  which  the  computation  is  made. 

Art.  89.  The  term  “gross  value  at  the  mine,” 
as  used  in  paragraphs  of  section  13114  of  the  act 
prescribing  a limit  to  the  amount  which  may 
be  deducted  in  the  return  of  individuals  and 
corporations  as  depreciation  in  the  case  of 
mines,  is  held  to  mean  the  market  value  of  ore, 
coal,  crude  oil,  and  gas  at  the  mine  or  well,  where 
such  value  is  established  by  actual  sales  at  the  mine 
or  well;  and  in  case  the  market  value  of  the  product 
of  the  mine  or  well  is  established  at  some  place 
other  than  at  the  mine  or  well,  or  on  the  basis  of  the 
bullion  or  metallic  value  of  the  ore,  then  the  gross 
value  at  the  mine  is  held  to  be  the  value  of  the  ore, 
coal,  oil,  or  gas  sold,  or  of  the  metal  produced,  less 
transportation,  reduction,  and  smelting  charges. 

In  case  the  reserves  shall  be  in  excess  of  the 
estimates,  no  further  deduction  on  account  of  deple- 
tion shall  be  made  where  the  capital  investment  has 
been  returned  to  the  corporation. 

Art.  90.  In  addition  to  the  deduction  to  meas- 
ure the  loss  due  to  depletion,  the  corporation  will 
be  allowed  the  usual  depreciation  of  its  machinery, 
equipment,  etc.,  such  depreciation  to  be  determined 
on  the  basis  of  the  cost  and  estimated  life  of  the 
property  with  respect  to  which  the  depreciation  is 
claimed. 

Art.  91.  Corporations  leasing  oil  or  gas  terri- 
tory shall  base  their  depletion  deduction  upon  the 
cost  of  the  lease,  and  not  upon  the  estimated  value, 
in  place  of  the  oil  or  gas. 

Art.  92.  Corporations  operating  mines  (includ- 
ing oil  or  gas  wells)  upon  a royalty  basis  only  can 
not  claim  depreciation  because  of  the  exhaustion  of 
the  deposits. 

Art.  93.  Unearned  increment  will  not  be  con- 
sidered in  fixing  the  value  on  which  depreciation 
shall  be  based. 

Art.  94.  (a)  Under  item  5 (a)  of  the  return 

form,  the  insurance  company  may  take  credit  for 
all  losses  actually  sustained  during  the  year  and  not 
compensated  by  insurance  or  otherwise,  including 
losses  resulting  from  the  sale  or  maturity  of  securities 
or  other  assets,  as  well  as  decreases  by  adjustment  of 
book  values  of  securities,  in  so  far  as  such  decreases 
represent  actual  declines  in  values  which  have  taken 


Definition  of 
"gross  value" 
at  the  mine. 


Deduction 
to  cease,  when. 


Depreciation 
of  plant,  etc. 


Corporations 
leasing  oil  or 
gas. 


Corporations 
operating  mines. 


Unearned  in- 
crement. 


Deduction 
of  losses,  depre- 
ciation, pay- 
ments on  policy 
contracts  by  in- 
surance c o m - 
panies. 


42 


INCOME  TAX  REGULATIONS. 


Losses  by- 
shrinkage  in 
value  of  prop- 
erty. 


Policy  con- 
tracts paid. 


Losses  in- 
curred and  un- 
paid not  de- 
ductible. 


Additions  to 
reserves  re- 
quired by  law, 
how  deter- 
mined. 


Assessment 
company  re- 
serves. 


place  during  the  year  for  which  the  return  is  made; 
also  losses  from  agency  balances,  or  other  accounts, 
charged  off  as  worthless;  losses  by  defalcation;  pre- 
mium notes  voided  by  lapse,  when  such  notes  shall 
have  been  included  in  gross  income.  This  item  will 
not,  however,  include  payments  on  policy  contracts. 

(b)  In  this  item  may  be  deducted  actual  losses 
sustained  within  the  year  by  reason  of  the  deprecia- 
tion of  property,  which  shall  have  been  so  entered 
on  the  books  of  the  company  as  to  constitute  a 
liability  against  its  assets.  An  arbitrary  deprecia- 
tion deduction  claimed  in  the  return,  but  not  evi- 
denced by  book  entry,  can  not  be  allowed. 

(c)  In  this  item  credit  will  be  taken  for  all 
death,  disability,  or  other  policy  claims,  including 
fire,  accident,  and  liability  losses,  matured  endow- 
ments, annuities,  payments  on  installment  policies, 
surrender  values,  and  all  claims  actually  paid  under 
the  terms  of  policy  contracts.  Salvage  need  not  be 
included  in  gross  income  if  deducted  in  ascertaining 
the  net  amount  paid  for  losses  under  policy  contracts. 
Reserves  covering  liabilities  for  losses  incurred,  re- 
ported, resisted,  adjusted  or  unadjusted  but  not 
paid,  can  not  be  deducted  from  gross  income  under 
this  or  any  other  item  of  the  return. 

( d ) The  reserve  funds  of  insurance  companies 
to  be  considered  in  computing  the  deductible  net 
addition  to  reserve  funds  are  held  to  include  only 
the  reinsurance  reserve  and  the  reserve  for  supple- 
mentary contracts  required  by  law  in  the  case  of 
life  insurance  companies,  the  unearned  premium 
reserves  required  by  law  in  the  case  of  fire,  marine, 
accident,  liability,  and  other  insurance  companies, 
and  only  such  other  reserves  as  are  specifically 
required  by  the  statutes  of  a State  within  which 
the  company  making  the  return  is  doing  business. 
The  reserves  used  in  computing  the  net  addition 
must  not  include  the  reserve  on  any  policies  the 
premiums  on  which  have  not  been  accounted  for 
in  gross  income.  For  the  purpose  of  this  deduction, 
the  net  addition  is  the  excess  of  the  reserve  at  the 
end  of  the  year  over  that  at  the  beginning  of  the 
year  and  may  be  based  upon  the  highest  authorized 
reserve  required  by  any  State  in  which  the  company 
making  the  return  does  business. 

In  the  case  of  assessment  insurance  companies, 
the  actual  deposits  of  sums  with  the  State  or  Terri- 
torial officers  pursuant  to  law,  as  additions  to  guar- 
anty or  reserve  funds,  shall  be  treated  as  payments 
required  by  law  to  reserve  funds. 


INCOME  TAX  REGULATIONS. 


43 


Art.  95.  The  amount  of  interest  accrued  and 
paid  within  the  year  by  a corporation  on  an  amount 
of  bonded  or  other  indebtedness  not  in  excess  of 
one-half  of  the  sum  of  the  interest-bearing  indebted- 
ness and  the  paid-up  capital  stock  outstanding  at 
the  close  of  the  year,  or,  if  no  capital  stock,  on  the 
amount  of  interest-bearing  indebtedness  not  exceed- 
ing the  amount  of  capital  employed  in  the  business 
at  the  close  of  the  year,  constitutes  an  allowable 
deduction;  that  is,  the  maximum  principal,  upon 
which  interest  for  the  purpose  of  this  deduction 
can  be  computed,  must  not  exceed,  in  the  one  case, 
one-half  of  the  sum  of  the  interest-bearing  indebted- 
ness and  the  capital  stock  outstanding  at  the  close 
of  the  year,  or,  in  the  other  case,  must  not  exceed 
the  amount  of  capital  employed  in  the  business  at 
the  close  of  the  year.  The  interest  to  be  deductible 
must  have  been  computed  on  the  proper  principal 
at  the  contract  rate  and  must  have  been  actually 
paid  within  the  year. 

Interest  paid  pursuant  to  contract  on  an  in- 
debtedness secured  by  mortgage  on  real  estate 
occupied  and  used  by  a corporation,  in  which  real 
estate  the  corporation  has  no  equity  or  to  which  it 
is  not  taking  title  is  an  allowable  deduction  from 
gross  income  as  a rental  charge,  payment  of  which 
is  required  to  be  made  as  a condition  to  the  con- 
tinued use  and  possession  of  the  property.  If, 
however,  the  corporation  has  an  equity  in  or  is 
purchasing  for  its  own  use  the  real  estate  upon  which 
such  mortgage  is  a prior  lien,  the  indebtedness  will 
be  held  to  be  indebtedness  of  the  corporation  within 
the  meaning  of  the  law  and  the  interest  paid  on 
such  mortgage  will  be  deductible  only  to  the  extent 
that  it,  with  interest  on  other  obligations  of  the 
corporation,  is  within  the  limit  fixed  by  the  act. 

Art.  96.  In  the  case  of  banks  and  banking 
associations,  loan  or  trust  companies,  interest  paid 
within  the  year  on  deposits,  or  on  moneys  received 
for  investment  and  secured  by  interest-bearing 
certificates  of  indebtedness  issued  by  such  bank, 
banking  association,  loan  or  trust  company,  may 
be  allowably  deducted  from  the  gross  income  of  such 
corporations. 

Art.  97.  Interest  paid  on  indebtedness,  wholly 
secured  by  collateral,  the  subject  of  sale  in  ordinary 
business  of  such  corporations,  is  also  deductible  to 
the  full  amount  of  such  interest  paid.  This  con- 
templates that  the  entire  interest  received  on  the 


What  consti- 
tutes allowable 
interest  deduc- 
tion. 


Interest  paid 
a s rental  de- 
ductible. 


Interest  o n 
mortgage  on 
real  estate  in 
which  corpora- 
tion has  equity 
not  deductible. 


Banks  and 
banking  associ- 
ations. 


Interest  paid 
on  indebted- 
ness. 


44 


INCOME  TAX  REGULATIONS. 


Different 
rates  of  inter- 
est. 


Taxes  deduct- 
ible. 


Taxes  not  de- 
ductible. 


Tax  on  cap- 
ital stock  o f 
banks. 


Import  duties. 


Reserves  for 
taxes. 


Foreign  cor- 
porations sub- 
ject to  tax. 


collateral  securing  such  indebtedness  shall  be  in- 
cluded in  the  gross  income  returned. 

Art.  98.  Interest  on  bonded  or  other  indebted- 
ness bearing  different  rates  of  interest  may  be  de- 
ducted from  gross  income  during  the  year,  provided 
the  aggregate  amount  of  such  indebtedness  on  which 
the  interest  is  paid  does  not  exceed  the  limit  pre- 
scribed by  law,  and  in  case  the  indebtedness  is  in 
excess  of  the  amount  on  which  interest  may  be 
legally  deducted  the  indebtedness  bearing  the  highest 
rate  may  be  first  considered  in  computing  the  interest 
deduction,  and  the  balance,  if  any,  will  be  computed 
upon  the  indebtedness  bearing  the  next  lower  rate 
actually  paid,  and  so  on  until  interest  on  the  maxi- 
mum principal  allowed  has  been  computed. 

Art.  99.  All  sums  paid  within  the  year  for 
taxes  imposed  under  the  authority  of  the  United 
States  or  of  any  State  or  Territory  thereof,  or  im- 
posed by  the  government  of  any  foreign  country, 
are  deductible  from  gross  income. 

Art.  100.  Taxes  paid  for  local  benefits  are  not 
deductible.  Taxes  paid  by  a corporation  pursuant 
to  a contract  guaranteeing  that  the  interest  payable 
on  its  bonds  or  other  indebtedness  shall  be  free  from 
taxation  are  not  deductible. 

Art.  101.  Banks  paying  taxes  assessed  against 
their  stockholders  because  of  their  ownership  of  the 
shares  of  stock  issued  by  such  banks  can  not  deduct 
the  amount  of  taxes  so  paid  in  making  their  return 
for  the  income  tax  imposed  by  this  act  unless  specially 
authorized  to  do  so  by  the  laws  of  the  State  in  which 
they  do  business.  The  shares  of  stock  are  the 
property  of  the  stockholders,  and  such  holders  are 
primarily  liable  for  the  tax. 

Art.  102.  Import  duties  or  taxes  are  not  de- 
ductible under  the  item  of  taxes  paid  during  the 
year,  but  should  be  included  in  arriving  at  the  cost 
of  goods  under  item  No.  4 (expenses). 

Art.  103.  Reserves  for  taxes  can  not  be  allowed, 
as  the  law  specifically  provides  that  only  such  sums 
as  are  paid  within  the  year  for  taxes  shall  be  deducted. 

Art.  104.  Foreign  corporations  shall  be  subject 
to  the  normal  tax  of  one  and  one-half  per  cent  com- 
puted upon  the  net  income  received  by  or  accruing  to 
such  corporations  from  business  transacted  and  capi- 
tal invested  in  this  State.  For  the  purpose  of  a tax 
the  net  income  of  such  foreign  organizations  shall  be 
ascertained  by  deducting  from  the  gross  income 
arising,  received,  or  accruing  from  business  done  and 


INCOME  TAX  REGULATIONS. 


45 


capital  invested  in  this  State  the  deductions  enu- 
merated in  the  act,  which  deductions  shall  be  limited 
to  expenditures  or  charges  actually  incurred  in  the 
maintenance  and  operation  of  the  business  trans- 
acted and  capital  invested  in  the  State  of  Missouri 
or,  as  to  certain  charges,  such  proportion  of  the 
aggregate  charges  as  the  gross  income  from  business 
done  and  capital  invested  in  the  State  of  Missouri 
bears  to  the  aggregate  income  within  and  without 
the  State  of  Missouri.  In  other  words,  the  deduc- 
tions from  the  gross  income  of  a foreign  corporation 
doing  business  in  this  State  should,  as  nearly  as 
possible,  represent  the  actual  expenses  and  author- 
ized charges  incident  to  the  business  done  and  capital 
invested  in  this  State  and  must  not  comprehend, 
either  directly  or  indirectly,  any  expenditures  or 
charges  incurred  in  the  transaction  of  business  or 
the  investment  of  capital  without  the  State  of  Mis- 
souri. 

Art.  105.  It  is  immaterial  whether  the  deduc- 
tions except  for  taxes  and  losses  are  evidenced  by 
actual  disbursements  in  cash,  or  whether  evidenced 
in  such  other  way  as  to  be  properly  acknowledged 
by  the  corporate  officers  and  so  entered  on  the 
books  of  the  corporation  as  to  constitute  a liability 
against  the  assets  of  the  corporation  making  the 
return.  Deductions  for  taxes,  however,  should  be 
the  aggregate  of  the  amounts  actually  paid,  as 
shown  on  the  cash  book  of  the  corporation.  Deduc- 
tions for  losses  should  be  confined  to  losses  actually 
sustained  and  charged  off  during  the  year  and  not 
compensated  by  insurance  or  otherwise.  Except  as 
the  same  may  be  modified  by  the  provisions  of  the 
act,  limiting  certain  deductions  and  authorizing 
others,  the  net  income  as  returned  for  the  purpose 
of  the  tax  should  be  the  same  as  that  shown  by  the 
books  or  the  annual  balance  sheet. 

Art.  106.  The  tax  imposed  upon  the  income 
of  corporations,  whether  domestic  or  foreign,  shall 
be  computed  upon  the  net  income,  ascertained  in 
the  manner  hereinbefore  indicated. 

Art.  107.  In  order  that  certain  classes  of  cor- 
porations may  arrive  at  their  correct  income,  it  is 
necessary  that  an  inventory,  or  its  equivalent,  of 
materials,  supplies,  and  merchandise  on  hand  for 
use  or  sale  at  the  close  of  each  calendar  year  shall 
be  made  in  order  to  determine  the  gross  income  or 
to  determine  the  expense  of  operation. 

A physical  inventory  is  at  all  times  preferred, 
but  where  a physical  inventory  is  impossible  and 


Deductions 
confined  to  ex- 
penses of  busi- 
ness done  i n 
the  State  of 
Missouri. 


How  deduc- 
tions shall  be 
evidenced. 


Tax  o n net 
income  of  cor- 
porations for 
the  year  1917. 


Inventories. 


Physical  in- 
ventory. 


46 


Form  of  re- 
turn. 


Penalties  im- 
posed by  act. 


Fraudulent 

returns. 


Fiscal  year, 
how  estab- 
lished. 


INCOME  TAX  REGULATIONS. 

an  equivalent  inventory  is  equally  accurate,  the 
latter  will  be  acceptable. 

An  equivalent  inventory  is  an  inventory  of 
materials,  supplies,  and  merchandise  on  hand  taken 
from  the  books  of  the  corporation. 

Art.  108.  Under  the  authority  conferred  by 
this  act,  forms  of  return  have  been  prescribed,  in 
which  the  various  items  specified  in  the  law  are  to 
be  stated.  Blank  forms  of  this  return  will  be  for- 
warded to  assessors  and  should  be  furnished  to  every 
corporation,  not  expressly  exempted,  on  or  before 
January  1 of  each  year.  Failure  on  the  part  of 
any  corporation,  joint-stock  company,  association, 
or  insurance  company  liable  to  this  tax  to  receive 
a prescribed  blank  form  will  not  excuse  it  from 
making  the  return  required  by  law,  or  relieve  it 
from  any  penalties  for  failure  to  make  the  return 
in  the  prescribed  time.  Corporations  not  supplied 
with  the  proper  forms  for  making  the  return  should 
make  application  therefor  to  the  assessor  in  whose 
county  is  located  its  principal  place  of  business 
in  ample  time  to  have  its  return  prepared,  veri- 
fied, and  filed  with  the  assessor  on  or  before 
the  last  due  date  as  hereinafter  defined.  Each 
corporation  should  carefully  prepare  its  return  so  as 
to  fully  and  clearly  set  forth  the  data  therein  called 
for.  Imperfect  or  incorrect  returns  will  not  be  ac- 
cepted as  meeting  the  requirements  of  the  law. 

Art.  109.  For  refusal  or  neglect  to  make  a 
return  within  the  prescribed  time,  or  for  a 
false  or  fraudulent  return,  the  corporation  so  offend- 
ing shall  be  liable  to  a specific  penalty  not  exceeding 
$5,000.  Any  person  divulging  unlawfully  any  in- 
formation whatever  disclosed  by  a return  shall  be 
punished  by  a fine  not  exceeding  $1,000,  or  by  im- 
prisonment not  exceeding  five  years,  or  both. 

Any  person  or  any  officer  of  any  corporation 
required  by  law  to  make,  render,  sign  or  verify  any 
return,  who  makes  any  false  or  fraudulent  return 
or  statement  with  intent  to  defeat  or  evade  the 
assessment  of  income  tax,  shall  be  guilty  of  a mis- 
demeanor and  shall  be  fined  not  exceeding  $2,500 
or  be  imprisoned  not  exceeding  one  year,  or  both, 
at  the  discretion  of  the  court,  with  the  costs  of  pros- 
ecution. 

Art.  110.  The  State  income-tax  law  authorizes 
corporations,  joint-stock  companies,  etc.,  under  cer- 
tain conditions  to  make  their  returns  on  the  basis 
of  an  established  “fiscal  year”  or  consecutive  12- 


INCOME  TAX  REGULATIONS. 


47 


months  period,  which  may  be  other  than  the  calendar 
year. 

Pursuant  to  this  provision  the  following  instruc- 
tions are  issued  for  the  guidance  of  assessors  and 
other  interested  parties: 

Any  corporation,  joint-stock  company,  or  asso- 
ciation, or  any  insurance  company  subject  to  the 
tax  imposed  by  this  act  may,  at  its  option,  have  the 
tax  payable  by  it  computed  upon  the  basis  of  the  net 
income  arising  or  accruing  from  all  sources  during 
its  fiscal  year,  provided  that  it  shall  designate  the 
last  day  of  the  month  selected  as  the  month  in  which 
its  fiscal  year  shall  close  as  the  day  of  the  closing 
of  its  fiscal  year,  and  shall  give  notice,  in  writing, 
to  the  assessor  of  the  county  in  which  its  princi- 
pal place  of  business  is  located,  of  the  day  it  has 
thus  designated  as  the  closing  of  such  fiscal  year. 

Art.  111.  The  Attorney-General  of  Missouri 
has  ruled  that  corporations  making  returns  on  the 
basis  of  a fiscal  year,  shall  make  them  at  the  same 
time  and  in  the  same  manner  as  calendar  year  cor- 
porations— that  is  between  January  1st  and  March 
1st  of  each  year.  Fiscal  year  corporations  shall  no- 
tify their  respective  assessors  in  writing  of  the  fact 
that  they  are  fiscal  year  corporations,  and  the  desig- 
nated date  their  business  year  closes. 

Art.  112.  Assessors  of  counties  receiving  notices 
of  the  selection  and  designation  of  the  “fiscal  years,” 
as  above  indicated,  will  make  record  of  the  same, 
recording  (a)  the  name  of  the  corporation  or  like 
organization,  ( b ) the  date  when  notice  was  given, 
(c)  the  day  designated  for  the  closing  of  the  fiscal 
year. 

Art.  113.  In  all  cases  where  a fiscal  year  is 
not  established  as  above  prescribed  returns  must  be 
made  on  the  basis  of  the  calendar  year.  Returns  must  be 
verified  under  oath  or  affirmation  by  its  president  or 
other  principal  officer,  and  its  treasurer  or  assistant 
treasurer;  that  is  to  say,  by  two  different  persons 
acting  in  the  official  capacity  indicated. 

Art.  114.  If  it  shall  appear  in  any  case  that 
returns  have  been  made  to  the  assessor  on  the  basis 
of  a fiscal  year  not  designated  as  above  indicated, 
the  corporations  making  such  returns  will  be  advised 
that  such  returns  can  not  be  accepted,  but  must 
be  made  to  cover  the  business  of  the  calendar  year. 

Art.  115.  Returns  made  under  this  act  and 
pursuant  to  these  instructions  must  be  made  on  the 
new  forms  prescribed  by  the  State  Auditor. 


May  desig- 
nate day  for 
closing  of  fiscal 
year  and  must 
give  a t least 
30  days’  notice 
to  assessor  of 
the  day  so  des- 
ignated. 


Fiscal  year; 
time  of  making 
return. 


Notice  to  as- 
sessors. 


Assessors 
must  make  a 
record  o f the 
designation  o f 
the  “fiscal 
year.” 


Where  fiscal 
year  is  not 
properly  estab- 
lished, returns 
must  be  made 
for  calendar 
year. 


Returns  made 
on  basis  of  fis- 
cal year  not  so 
designated  can 
not  be  ac- 
cepted. 


Returns  for 
1921  must  be 
made  on  new 
forms. 


48 


INCOME  TAX  REGULATIONS. 


Extension 
not  to  exceed 
30  days. 


Returns  prop- 
erly mailed  i n 
time  to  reach 
assessor  not 
subject  to  pen- 
alty under  cer- 
tain conditions. 


Last  due  date 
defined. 


When  due 
date  falls  o n 
Sunday  or  legal 
holiday. 


Assessment 
and  payment  of 
taxes. 


Notice  of  as- 
sessment. 


Art.  116.  An  extension  of  time  within  which  a 
return  may  be  filed  can  in  no  case  exceed  30  days 
from  the  date  on  which  the  return  is  due  and  can 
be  granted  only  upon  written  application  to  the 
assessor,  and  in  case  of  sickness  or  absence  of  an 
officer  whose  signature  to  the  return  is  required, 
such  application  to  be  made  prior  to  the  date  on 
which  the  return  is  due. 

Art.  117.  If  a return  is  made  and  placed  in  the 
United  States  mails,  properly  addressed,  and  postage 
paid,  in  ample  time,  in  due  course  of  mails,  to  reach 
the  office  of  the  assessor  or  deputy  assessor  on  or 
before  the  last  due  date,  no  penalty  will  be  held  to 
attach  should  the  return  not  be  actually  received 
by  such  officer  until  subsequent  to  that  date. 

Art.  118.  “Last  due  date,”  as  hereinbefore 
used,  is  construed  to  mean  the  last  day  upon  which 
a return  is  required  to  be  filed  in  accordance  with 
the  provisions  of  the  law,  or  the  last  day  of  the 
period  not  exceeding  30  days  covered  by  an  extension 
of  time  granted  by  the  assessor. 

Art.  119.  When  the  due  date  as  above  defined 
falls  on  Sunday  or  on  a legal  holiday,  the  last  due 
date  will  be  held  to  be  the  day  next  following  such 
Sunday  or  legal  holiday  and  the  return  should  be 
made  to  the  assessor  not  later  than  such  following 
day,  or,  if  placed  in  the  mails,  it  should  be  posted 
in  ample  time  to  reach  the  assessor’s  office,  under 
ordinary  handling  of  the  mails,  on  or  before  the  date 
on  which  the  return  is  thus  made  due  in  the  office 
of  the  assessor. 

Art.  120.  All  assessments  against  corporations, 
etc.,  making  returns  are  required  to  be  made 
and  the  several  corporations,  joint-stock  com- 
panies, etc.,  notified  of  the  amount  for  which 
they  are  liable  on  or  before  the  first  day  of  June 
of  each  successive  year,  and  said  assessments 
shall  be  paid  on  or  before  the  first  day  of  June  of 
such  year.  In  case  of  refusal  or  neglect  by  a 
corporation,  etc.,  to  make  a return,  and  in  case 
of  false  or  fraudulent  return,  the  State  Auditor, 
upon  the  discovery  thereof  within  three  years  after 
such  returns  are  due,  shall  make  a return  upon 
information  obtained  in  the  manner  provided  in  the 
act,  and  the  assessment  made  on  the  basis  of  such 
return  shall  be  paid  immediately  upon  notice  and 
demand  given  by  the  collector. 

Art.  121.  When  the  assessments  shall  have  been 
made,  the  returns  shall  be  filed  in  the  office  of  the 


INCOME  TAX  REGULATIONS. 


49 


County  Clerk  and  shall  constitute  public  records, 
subject  to  inspection  upon  the  order  of  the  State 
Auditor.  Copies  of  returns  on  file  in  the  County 
Clerk’s  office  are  not  permitted  to  be  sent  to  any 
person,  except  to  the  corporation  itself  or  to  its  duly 
authorized  attorney. 

Art.  122.  At  the  request  of  the  Attorney-Gen- 
eral, or  by  direction  of  the  State  Auditor,  certified 
copies  of  returns  may  be  made  and  delivered  to  the 
prosecuting  attorneys  of  the  counties  in  the  State 
for  their  use  as  evidence  in  the  prosecution  or  defense 
of  suits  in  which  the  collection  or  legality  of  the  tax 
assessed  on  the  basis  of  such  returns  is  involved, 
or  in  any  suit  to  which  the  State  of  Missouri  and  the 
corporation,  etc.,  making  the  return  are  parties  and 
in  which  suit  such  certified  copies  would  constitute 
material  evidence. 

Art.  123.  The  disclosure  by  any  assessor, 
deputy  assessor,  agent,  clerk,  or  other  officer  or 
employee  of  the  State  of  Missouri  to  any  person  of 
any  information  whatever  contained  in  or  set  forth 
by  any  return  of  annual  net  income  made  pursuant 
to  this  act  is,  by  the  act,  made  a misdemeanor, 
and  is  punishable  by  a fine  not  exceeding  $1,000,  or 
by  imprisonment  not  exceeding  two  years,  or  both, 
at  the  discretion  of  the  court,  and  if  the  offender 
is  an  officer  or  employee  of  the  State  of  Missouri 
he  shall  be  dismissed  and  be  incapable  thereafter 
of  holding  any  office  under  the  State  of  Missouri. 

Art.  124.  No  particular  system  of  bookkeeping 
or  accounting  will  be  required  by  the  department. 
However,  the  business  transacted  by  corporations 
must  be  so  recorded  that  each  and  every  item  set 
forth  in  the  return  of  annual  net  income  may  be 
readily  verified  by  an  examination  of  the  books  of 
account. 

Art.  125.  The  books  of  a corporation  are  as- 
sumed to  reflect  the  facts  as  to  its  earnings,  income, 
etc.  Hence  they  will  be  taken  as  the  best  guide 
in  determining  the  net  income  upon  which  the  tax 
imposed  by  this  act  is  calculated.  Except  as  the 
same  may  be  modified  by  the  provisions  of  the  law, 
wherein  certain  deductions  are  limited,  the  net 
income  disclosed  by  the  books  and  verified  by  the 
annual  balance  sheet,  or  the  annual  report  to  stock- 
holders, should  be  the  same  as  that  returned  for 
taxation. 


Returns  are 
public  records, 
subject  to  in- 
spection upon 
order  of  the 
State  Auditor. 


C ertif ied 
copies  o f re- 
turns. 


Penalty  for 
giving  informa- 
tion in  regard 
to  returns. 


Bookkeeping. 


Books  of  ac- 
count  best 
guide  to  in- 
come. 


50 


INCOME  TAX  REGULATIONS. 


Omitted 
taxes  may  be 
assessed. 


Corporations 
subject  to  nor- 
mal tax. 


Examination 
of  books. 


Profit  and 
oss  statement. 


Art.  126.  In  cases  wherein  corporations  have 
neglected  or  refused  to  make  returns,  and  in  cases 
wherein  returns  made  are  found,  upon  investigation 
or  otherwise,  to  be  false  or  fraudulent,  the  State 
Auditor  may,  upon  discovery  thereof,  at  any  time 
within  three  years  after  said  return  is  due,  make 
return  upon  the  information  obtained  in  the  manner 
provided  in  the  act,  and  the  tax  so  discovered  to 
be  due,  together  with  the  additional  tax  prescribed, 
shall  be  assessed,  and  the  amount  thereof  shall  be 
paid  immediately  upon  notice  and  demand. 

Art.  127.  Corporations  coming  within  the  terms 
of  this  law  are  subject  to  the  normal  tax  only;  that 
is,  a tax  computed  on  their  entire  net  income  re- 
gardless of  the  amount  of  such  net  income. 

Art.  128.  For  the  purpose  of  verifying  any 
return,  made  pursuant  to  this  act,  the  State  Auditor 
may,  by  any  duly  authorized  agent  or  deputy,  cause 
the  books  of  such  corporation  to  be  examined,  and 
if  such  examination  discloses  that  the  corporation 
is  liable  to  tax  in  addition  to  that  previously  assessed, 
or  assessable,  the  same  shall  be  assessed  and  shall 
be  payable  immediately  upon  notice  and  demand. 
For  the  purpose  of  such  examination,  the  books  of 
corporations  shall  be  open  to  the  examining  officer, 
or  shall  be  produced  for  this  purpose  upon  sum- 
mons issued  by  any  properly  authorized  officer. 

Art.  129.  All  corporations  are  absolutely  re- 
quired to  paste  or  attach  to  their  income  tax  returns, 
their  profit  and  loss  statement,  showing  their  net 
gain  or  loss  as  per  their  books,  for  the  period  cov- 
ed by  their  return. 


INCOME  TAX  REGULATIONS. 


51 


PART  3. 

Assessment  and  Collection. 

Art.  130.  All  amounts  of  income  listed  by 
assessors  will  be  entered  on  the  “income  assessment 
book,”  Form  1,  in  the  case  of  individual,  and  on 
Form  2 in  the  case  of  corporations. 

Art.  131.  The  names  of  corporations  subject 
to  tax  will  be  listed  on  Form  2,  according  to  their 
designated  class,  and  in  alphabetical  order  as  to 
each  class.  Names  of  individuals  subject  to  tax  will 
be  listed  on  Form  1,  alphabetically,  without  reference 
to  class. 

Art.  132.  The  assessor  of  any  county  or  town- 
ship may  require  any  person  in  his  county  or  town- 
ship, who  shall  be  subject  to  an  income  tax,  to  make 
report  to  him  at  such  time  and  in  such  manner  and 
form  as  he  may  prescribe. 

Art.  133.  The  assessor  of  each  county  or  town- 
ship, in  this  State,  shall  complete  the  assessment  of 
incomes,  on  or  before  the  first  day  of  March  of  each 
year,  and  shall  immediately  after  the  said  assess- 
ment of  incomes  is  completed  and  the  assessment 
book  of  same  is  made  and  delivered  to  the  County 
Clerk,  all  Income  returns  shall  be  filed  at  the  office 
of  the  Collector  of  the  Revenue  and  shall  be  de- 
stroyed by  said  Collector  within  six  months  after 
said  income  tax  becomes  due,  provided  that  no 
income  tax  return  shall  be  destroyed  before  the  tax 
has  been  paid. 

Art.  134.  Assessors  before  entering  upon  the 
duties  herein  required  of  them,  shall  execute  a bond 
to  the  satisfaction  of  the  County  Court,  or  the 
Clerk  thereof  in  vacation,  or  the  Council  of  the  City 
of  St.  Louis,  with  three  or  more  solvent  sureties; 
such  bond  to  be  filed  in  office  of  the  County  Clerk 
or  City  Auditor. 

Art.  135.  Any  assessor  who  shall  fail  or  refuse 
to  perform  any  duty  in  the  time  prescribed  by  law, 
may  be  removed  and  another  appointed  in  his  place. 

Art.  136.  In  case  of  neglect  occasioned  by 
sickness  or  absence  of  an  officer  of  a corporation, 
joint-stock  company  or  association,  the  assessor  may 
allow  such  further  time  as  he  may  deem  necessary 
not  to  exceed  thirty  days. 

Art.  137.  Assessors  are  empowered  to  estimate 
incomes. 


Amount  of  - 
income  to  be 
reported  on  as- 
sessment lists. 


Names  to  be 
listed  in  alpha- 
betical order. 


Assessor  may 
require  persons 
to  report. 


Assessor  t o 
complete  and 
certify  assess- 
ment. 


Assessor  t o 
execute  bond. 


Assessor  may 
be  removed, 
when. 


Assessor 
may  allow  fur- 
ther time  t o 
file  lists,  when. 


A s s e s s o r’s 
power  to  esti- 
mate. 


52 


INCOME  TAX  REGULATIONS. 


Compensa- 
tion o f assess- 
ors. 


Powers  of 
boards  of  equal- 
ization. 


County  clerk 
to  extend  tax. 


County  clerk 
o r auditor  t o 
certify  assess- 
ment. 


County  clerk 
o r auditor  t o 
certify  abstract 
of  taxes. 


County  clerk 
to  report  collec- 
tion. 


Compensa- 
tion of  county 
clerk  o r au- 
ditor. 


Collectors’ 

duties. 


Collectors 
to  report  and 
remit  tax. 


Art.  138.  Assessors  are  allowed  the  same  com- 
pensation for  their  services  as  is  allowed  under  the 
general  revenue  laws  of  the  State. 

Art.  139.  The  County  Boards  of  Equalization 
and  appeals  have  the  same  powers  and  duties  with 
respect  to  the  income  tax  as  they  have  with  respect 
to  the  assessment  of  personal  property,  with  the 
additional  power  to  estimate  incomes. 

Art.  140.  The  County  Clerk,  or  City  Auditor, 
shall  extend  the  tax  against  each  person  or  corpora- 
tion on  the  “income  assessment  book”  returned  by 
the  assessors  at  the  rate  prescribed  by  law. 

Art.  141.  The  County  Clerk,  or  City  Auditor, 
shall  immediately,  after  the  “income  assessment 
book”  and  the  assessment  lists  have  been  filed  in 
his  office,  certify  under  the  seal  of  his  office,  to  the 
State  Tax  Commission,  the  aggregate  amount  of  in- 
come assessed  against  individuals,  corporations, 
joint-stock  companies,  insurance  companies,  mutual 
insurance  companies  and  railroad  companies  injiis 
county  or  the  City  of  St.  Louis. 

Art.  142.  The  County  Clerk  and  the  Auditor 
of  the  City  of  St.  Louis  shall  upon  completion  of 
the  extension  of  the  taxes  levied  under  this  act,  upon 
the  “income  assessment  book”  certify  under  the 
seals  of  their  respective  offices,  to  the  State  Auditor, 
an  aggregate  abstract  of  the  valuation  of  the  several 
classes  of  income,  and  the  total  tax  extended  on 
such  “income  assessment  book”  against  each  of  said 
classes,  together  with  the  receipt  of  the  Collector  of 
the  Revenue  of  his  county  or  city,  attached  thereto. 

Art.  143.  The  County  Clerk  shall  report  all 
taxes  collected  by  the  collector  under  this  act  at  the 
same  time  and  in  the  same  manner,  as  he  is  required 
by  the  revenue  laws  of  the  State,  to  report  collec- 
tions of  other  taxes. 

Art.  144.  The  County  Clerk  and  the  City 
Auditor  are  allowed  the  same  compensation  for 
services  performed  under  this  act  as  is  allowed  for 
like  services  under  the  revenue  laws  of  the  State, 
such  fees  to  be  wholly  paid  by  the  State. 

Art.  145.  The  collector  of  each  county  and  the 
City  of  St.  Louis  shall  collect  the  taxes  imposed  by 
this  act  in  the  same  manner  as  personal  taxes  are 
collected,  subject  to  the  penalties  imposed  by  this 
act,  and  the  revenue  laws  of  the  State. 

Art.  146.  Collectors  of  the  revenue  shall  report, 
to  the  County  Clerk,  and  make  remittances  to  the 
State  Treasurer  of  all  taxes  collected  under  this  act 


INCOME  TAX  REGULATINNS 


53 


in  the  same  manner  and  at  the  same  time  as  is  re- 
quired under  the  revenue  laws  of  the  State  as^to 
real  and  personal  taxes. 

Act.  147.  Collectors  are  allowed  the  same  com- 
pensation for  collecting  taxes  under  this  act  as  are 
allowed  for  collecting  real  and  personal  taxes  under 
the  revenue  laws  of  the  State. 

GEORGE  E.  HAGKMANN, 

State  Auditor  of  Missouri. 


Collectors’ 

compensation. 


V 


UNIVERSITY  OF  ILLINOIS-URBANA 


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